The PRA's methodologies for setting Pillar 2 capital

Statement of Policy

Update 24 February 2020

This Statement of Policy (SoP) has been updated following publication of Policy Statement (PS) 3/20 ‘Responses to Occasional Consultation Paper 25/19 – Chapters 2 and 3’. This version takes effect from Monday 24 February 2020, and is available under ‘current version’ in the timeline below. 

Overview

This Statement of Policy sets out the methodologies that the Prudential Regulation Authority (PRA) uses to inform the setting of Pillar 2 capital for firms to which CRD IV applies.

There are two sections:

  1. Section I: Pillar 2A methodologies. This sets out the methodologies we will use to inform the setting of a firm’s Pillar 2A capital requirement for credit risk, market risk, operational risk, counterparty credit risk, credit concentration risk, interest rate risk in the non-trading book (hereafter referred to as interest rate risk in the banking book (IRRBB)), pension obligation risk and RFB group risk.
  2. Section II: Pillar 2B. This provides information on the purpose of the PRA buffer, how it is determined and how it relates to the CRD IV buffers. Section II also provides details on the PRA’s approach to tackling weak governance and risk management under Pillar 2B and RFB group risk.

Firms are required by the Reporting Pillar 2 part of the PRA Rulebook, or may be asked, to submit data to inform the PRA’s approach to setting Pillar 2A capital requirements. Data may be requested on an individual, consolidated and/or sub-consolidated basis as applicable.

Current version

Published: 24 February 2020

Updated following PS3/20 ‘Responses to Occasional Consultation Paper 25/19 – Chapters 2 and 3’.

Effective from: 24 February 2020.

Past versions

Published: 23 January 2020

This SoP was updated following publication of PS2/20 ‘Pillar 2 capital: Updates to the framework’.

Effective from: 23 January 2020

Published: 30 April 2018

This SoP was updated following publication of PS9/18 ‘Groups policy and double leverage’.

Effective from: 1 January 2019 (superseded on 23 January 2020 by January 2020 version.)

Published: 30 April 2018

This SoP was updated following publication of PS8/18 ‘Pillar 2: Update to reporting requirements’.

Effective from: 1 October 2018 (superseded on 1 January 2019 by April 2018 version)

Published: 12 December 2017

This SoP was updated following publication of PS30/17 ‘Pillar 2A capital requirements and disclosure’.

Effective from: 1 January 2018 (superseded on 1 October 2018 by April 2018 version)

Published: 3 October 2017

This SoP was updated following publication of PS22/17 ‘Refining the PRA’s Pillar 2A capital framework’.

Effective from: 1 January 2018 (superseded on 12 December 2017 by December 2017 version)

Published: 1 February 2017

This statement of policy (SoP) was updated following publication of PS3/17 ‘The implementation of ring-fencing: reporting and residual matters – response to CP25/16 and Chapter 5 of CP36/16’.

Effective from: 1 January 2019 (superseded on 1 January 2019 by April 2018 version)

Published: 7 July 2016

Updated following publication of PS20/16 ‘The implementation of ring-fencing: prudential requirements, intragroup arrangements and use of financial market infrastructures' which included final ring-fencing rules and Supervisory Statement 8/16 ‘Ring-fenced bodies (RFBs)’.

Effective from: 1 January 2019 (superseded on 1 February 2017 by February 2017 version)

Published: 29 July 2015

Initial publication following PS17/15 'Assessing capital adequacy under Pillar 2'.

Effective from: 1 January 2016 (superseded on 3 October by October 2017 version)

Was this page useful?
Add your details...