PRA Regulatory Digest - May 2020

The PRA Regulatory Digest is for people working in the UK financial services industry and highlights key regulatory news and publications delivered for the month.
Published on 01 June 2020

Top news and publications

  • Regulatory measures for firms in response to Covid-19
  • PS11/20 ‘Credit risk: Probability of Default and Loss Given Default estimation
  • PS12/20 ‘Responses to Occasional Consultation Paper 25/19 – Chapter 5: Retirement interest-only mortgages’
  • Life beyond Solvency II: a view from the top of the regulator – speech by Charlotte Gerken

Regulatory measures for firms in response to Covid-19

Q&A on Capital Requirements Regulation (CRR) requirements for property valuations

29 May 2020

The PRA published a set of Q&As answering some commonly asked questions regarding residential and commercial property valuations for CRR purposes during the period of disruption caused by Covid-19. The document is aimed at all firms to which the CRR applies.

Statement by the PRA on regulatory capital and IFRS 9 requirements for payment holidays

22 May 2020

The PRA published a statement on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges of Covid-19.

Statement by the PRA on conversion of Pillar 2A capital requirements from RWA percentage to nominal amount

7 May 2020

The PRA published a statement on temporarily setting Pillar 2A requirements as a nominal amount, to alleviate unwarranted pressure on firms.

Statement by the Bank of England and Prudential Regulation Authority on resolution measures and Covid-19

7 May 2020

The Bank of England (Bank) and PRA published a statement announcing amendments to resolution measures aimed at alleviating operational burdens on PRA-regulated firms in response to the Covid-19 outbreak. The PRA also published ‘Modification by consent of the Resolution Assessment Part of the PRA Rulebook: Rules 3.1(1) and Rule 4.1(1)’, which is available on the Waivers and modifications of rules page.

Statement on credit risk mitigation eligibility and leverage ratio treatment of loans under the Bounce Back Loan Scheme (BBLS)

4 May 2020

The PRA published a statement on credit risk mitigation eligibility and leverage ratio treatment of loans under the Bounce Back Loan Scheme (BBLS). The PRA also published a ‘Modification by consent of the exclusion of loans under the BBLS from the calculation of the total exposure measure of the Leverage Ratio’, available on the Waivers and modifications of rules page.

News and speeches

Life beyond Solvency II: a view from the top of the regulator – speech by Charlotte Gerken

22 May 2020

Charlotte Gerken looks at how the insurance industry has responded to the Covid-19 crisis, including how elements of the Solvency II regime have behaved in recent conditions.

Cross-cutting publications and updates

PS12/20 ‘Responses to Occasional Consultation Paper 25/19 – Chapter 5: Retirement interest-only mortgages’

14 May 2020

This PRA Policy Statement (PS) provides feedback to responses to Chapter 5 of Consultation Paper (CP) 25/19 ‘Occasional Consultation Paper – October 2019’. It also contains the PRA’s final policy, as follows:

This PS is relevant to all banks, building societies and PRA-authorised investment firms offering retirement interest-only (RIO) mortgages. It is also relevant to firms that have offered RIO mortgages in the past, or may do so in the future.

This PS should be read in conjunction with PS11/20 ‘Credit risk: Probability of Default and Loss Given Default estimation’, which also makes an update to SS11/13. See more information below in ‘Banking publications and updates’.

The Financial Services Regulatory Initiatives Forum launches Grid to help financial firms’ planning

7 May 2020

Jointly with the Bank, Financial Conduct Authority, Competition & Markets Authority, Payment Systems Regulator and HM Treasury (as observer member), the PRA published the Regulatory Initiatives Forum’s first initiatives grid – a consolidated plan of initiatives that the authorities consider will, or may, have significant operational impact on firms across the next 12 months.

Further information

Banking publications and updates

PS11/20 ‘Credit risk: Probability of Default and Loss Given Default estimation’

14 May 2020

This PRA PS provides feedback to responses to CP21/19 ‘Credit risk: Probability of Default and Loss Given Default estimation’, which consulted on proposals to implement the European Banking Authority’s regulatory products that relate to Probability of Default estimation and Loss Given Default estimation. It also contains the PRA’s final policy in an updated SS11/13 ‘Internal Ratings Based (IRB) approaches’.

This PS is relevant to UK banks, building societies and PRA-designated UK investment firms.

Further information

For information on banking regulatory returns and how to report them, visit the Regulatory reporting – banking sector page.

For details of forms used to collect data through the online statistical data application (OSCA), visit the Forms, definitions, and validations page.

Insurance publications and updates

Internationally Active Insurance Groups (IAIGs) headquartered in the UK

28 May 2020

IAIGs are the focus of the International Association of Insurance Supervisors (IAIS) Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame). The PRA have identified UK IAIGs in accordance to the criteria set out in ComFrame (CF 23.0.a and CF 23.0.b) for the purpose of the Insurance Capital Standard version 2.0 for the Monitoring Period.

The PRA have identified the list of Internationally Active Insurance Groups (IAIGs) headquartered in the UK. Please see the Regulatory Reporting – Insurance sector webpage for more information.

PS14/20 ‘Solvency II: Prudent Person Principle’

27 May 2020

This PRA PS provides feedback to responses to CP22/19 ‘Solvency II: Prudent Person Principle’, which consulted on the PRA’s proposed expectations for investment by firms in accordance with the Prudent Person Principle (PPP) as set out in Chapters 2 to 5 of the Investments Part of the PRA Rulebook (which transpose Article 132 of the Solvency II Directive (2009/138/EC) (Solvency II)). It also contains the PRA’s final policy in SS1/20 ‘Solvency II: Prudent Person Principle’.

This PS is relevant to all UK Solvency II firms (including in the context of provisions relating to Solvency II groups), mutuals, third-country branches, the Society of Lloyd’s and its managing agents.

PS13/20 ‘Insurance special purpose vehicles: Updates to authorisation and supervision’

22 May 2020

This PRA PS provides feedback to responses to CP19/19 ‘Insurance special purpose vehicles: Updates to authorisation and supervision’. It also contains the PRA’s final policy, as follows:

  • amendments to the Insurance Special Purpose Vehicle Part of the PRA Rulebook;
  • an updated SS8/17 ‘Authorisation and supervision of insurance special purpose vehicles’; and
  • an updated Multi-arrangement Insurance Special Purpose Vehicle New Risk Assumption Notification Form.

This PS is relevant to parties who wish to apply for, or have obtained authorisation as, an insurance special purpose vehicle (ISPV). It is also relevant to insurers and reinsurers seeking to use UK ISPVs as risk mitigation in accordance with Solvency II.

Further information

For information on insurance regulatory returns and how to report them, visit the Regulatory reporting – insurance sector page.

Your inputs and views on open PRA consultations and other requests closing in June 2020

Closing date: 26 June

More information

Bank Underground - a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.

Bank Overground - the purpose of Bank Overground is to share our internal analysis. Each bite-sized post summarises a piece of analysis that supported a policy or operational decision. Bank Overground published an article on ‘How are we monitoring the economy during the Covid-19 pandemic?

KnowledgeBank - from interest rates and inflation through to bank failures and financial crises, KnowledgeBank uses everyday examples and engaging visuals to bring economics to life.

European and international developments - readers are also referred to the following websites:

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