Simplified Obligations for recovery planning

Policy Statement 25/20 | Consultation Paper 10/20

Published on 07 December 2020

Simplified Obligations for recovery planning – PS 25/20

Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to the PRA’s Consultation Paper (CP) 10/20 ‘Simplified Obligations for recovery planning’ (page 2 of 2). It also contains the PRA’s final policy, in the form of the updated Supervisory Statement (SS) 9/17 ‘Recovery planning’ (Appendix 1).

This PS is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms, and their qualifying parent undertakings (firms), to which the Recovery Plans Part of the PRA Rulebook applies. The policy is likely to be of particular interest to smaller and non-systemic firms that do not perform critical functions.

Summary of responses

The PRA received two responses to the CP. The responses were supportive of the proposal to introduce Simplified Obligations. One response suggested that the criteria for assessing eligibility for Simplified Obligations take into consideration firms that are subject to both solvent wind down planning and recovery and resolution plans. The other response suggested additional measures to further reduce recovery planning expectations for eligible firms, and requested additional clarification on some of the proposals in CP10/20. The PRA’s feedback to these responses, and final policy decision, are set out in Chapter 2.

Respondents also noted that the PRA’s proposals would not result in substantial cost savings. The PRA recognises that the cost savings arising from the proposals may be limited. In particular, the PRA noted in PS29/17 ‘Recovery planning’ that the burden of recovery planning should naturally reflect the size and complexity of the firm in question. The final policy is intended to improve clarity by specifying certain measures that firms may take.

Implementation

The changes outlined in this PS will take effect on publication of this PS on Monday 7 December 2020.

Policy Statement 25/20

Appendix


Published on 23 July 2020 

Simplified Obligations for recovery planning – CP 10/20

Overview

In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out a proposal to allow certain firms to benefit from Simplified Obligations for recovery planning (‘Simplified Obligations’), in light of the discretion the PRA has under 4(1) of the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) as to whether to apply Simplified Obligations.

This CP proposes changes to Supervisory Statement (SS) 9/17 ‘Recovery planning’ that would reduce expectations for certain firms’ recovery planning. The firms concerned would be notified by the PRA that they are eligible for Simplified Obligations.

This CP is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms and their qualifying parent undertakings to which the Recovery Plans Part of the PRA Rulebook applies.

Implementation

The PRA intends to publish a final policy statement and to notify firms that are eligible for Simplified Obligations in H2 2020. Pending consideration of the responses to this CP, the amendments to SS9/17 would apply with immediate effect once the final policy statement is published.

Responses and next steps

This consultation closes on Friday 23 October 2020. The PRA invites feedback on the proposals set out in this CP. Please address any comments or enquiries to CP10_20@bankofengland.co.uk.

The proposals set out in this CP have been designed in the context of the UK’s withdrawal from the European Union and entry into the transition period, during which time the UK remains subject to European law. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework at the end of the transition period, including those arising once any new arrangements with the European Union take effect. The PRA has assessed that the proposals would not need to be amended under the EU (Withdrawal) Act 2018. Please see PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’ for further details.

Consultation Paper 10/20  Opens in a new window Opens in a new window Opens in a new window

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