Changes to the PRA’s large exposures framework

Policy Statement 14/18 | Consultation Paper 20/17

Published 28 June 2018

Changes to the PRA’s large exposures framework - PS14/18

Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 20/17 ‘Changes to the PRA’s large exposures framework’.

It contains updates to:

  • PRA rules on Large Exposures and Regulatory Reporting (Appendix 1);
  • Supervisory Statement (SS) 16/13 ‘Large exposures’ (Appendix 2); and
  • SS34/15 ‘Guidelines for completing regulatory reports’ (Appendix 3).

This PS also contains a simplified worked example of the application of the large exposures (LE) limits at the level of the UK consolidated group (Appendix 4).

This PS is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms and financial institutions that are subsidiaries of these firms, regardless of their location.

Summary of responses

The PRA received five responses to CP20/17. Respondents supported the proposals to provide additional guidance in SS16/13. Most respondents agreed with the proposal to change the Non-core large exposures group (NCLEG) limit for firms with both a Core UK group (CUG) and an NCLEG permission and the exemption of individual NCLEG exposures at the UK consolidated level. Some respondents sought clarity on certain aspects of these proposals.

Respondents also welcomed the proposal to exempt internal minimum requirements for own funds and eligible liabilities (internal MREL) exposures from LE limits to facilitate the orderly resolution of banking groups. However, they questioned the process, scope and the timing of implementation for this exemption.

Implementation

The changes to the rules and expectations will take effect from Friday 29 June 2018.

Policy statement

PDF Policy Statement 14/18

Appendices

Appendix 1: PRA Rulebook CRR firms large exposures amendment instrument

Appendix 2: SS16/13 UPDATE ‘Large Exposures’

Appendix 3: SS34/15 UPDATE ‘Guidelines for completing regulatory reports’


Published 04 October 2017

Changes to the PRA’s large exposures framework - CP20/17

Overview

This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed changes and clarifications to requirements relating to intragroup transactions in the Large Exposures (LE) Part of the PRA Rulebook. The PRA also proposes to update Supervisory Statement (SS) 16/13 ‘Large Exposures’ to reflect the updates to PRA expectations.

The PRA has reviewed the intragroup LE framework as part of its overall review of the groups policy framework.  The details of this review and the proposed guiding principles are included in CP19/17 ‘Groups policy and double leverage’ (see Related Links). The proposals aim to simplify the overall intragroup LE framework, improve the consistency of the process of granting intragroup permissions and facilitate the orderly resolution of banking groups.

This CP is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms and their qualifying parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as credit institutions, investment firms and financial institutions that are subsidiaries of these firms, regardless of their location.

Summary of Proposals

The PRA is proposing the following regarding intragroup permissions:

  • Enhanced guidance on the application of criteria for core UK group (CUG) and non-core LE group (NCLEG) permissions;
  • Changing the NCLEG calibration basis for firms that have both a CUG and an NCLEG permission; and
  • Changing how the NCLEG permission applies at the UK consolidated group level.

Due to minimum requirements of own funds and eligible liabilities (MREL), the PRA is also proposing to allow firms to apply to exempt from the LE limit, exposures identified and reported as internal MREL. 

Responses and next steps

This consultation closed on Thursday 4 January 2018.

The PRA is proposing that the changes to the rules and proposed guidance take effect after the completion of the consultation period and following publication of the final policy.

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