Pillar 2: Update to reporting requirements – CP25/17
There are two main areas that the PRA considers when conducting a Supervisory Risk and Evaluation Process (SREP) for a firm:
(i) risks to the firm that are either not captured, or not fully captured, under the Pillar 1 requirements of the Capital Requirements Regulation (CRR); and
(ii) risks to which the firm may become exposed over a forward looking planning horizon (eg due to changes to the economic environment).
In accordance with the Pillar 2 methodologies set out in Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’, in an SREP the PRA calculates capital benchmarks for those risks in light of the information included in a firm’s ICAAP and the data reported in the Pillar 2 data items.
While the assessment of risks is facilitated by data provided in the Pillar 2 data items, firms’ internal stress test data, which inform the assessment of risks covered are only provided in an unstructured format in firms’ ICAAP documents.
This CP is relevant to banks, building societies and PRA-designated investment firms (‘firms’).
Summary of proposals
In this consultation paper (CP), the Prudential Regulation Authority (PRA) proposes a:
- new data item (PRA111) to capture stress testing data currently included in firms’ Internal Capital Adequacy Assessment Process (ICAAP) documents;
- reduction in the frequency of reporting of the data items in the Reporting Pillar 2 Part of the PRA Rulebook (‘Pillar 2 data items’) for some firms; and
- consolidation of definitions in several reporting Parts of the PRA Rulebook into the Glossary.
The PRA is also proposing to update the reporting instructions in Supervisory Statement (SS) 32/15 ‘Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082’ (Appendix 2).
Responses and next steps
This consultation closes on Tuesday 6 March 2018. The PRA invites feedback on the proposals set out in this consultation. Please address any comments or enquiries to CP25_17@bankofengland.co.uk.
Draft Instructions for PRA111 are provided in the zip file below. Please save the zip file to a local drive, “Extract all” and then start from the “Home” page to be able to read its entire contents.