PS4/22 | CP20/21 – Trading activity wind-down

Policy Statement 4/22 | Consultation Paper 20/21

Published on 6 May 2022

PS4/22 – Trading activity wind-down

Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 20/21 ‘Trading activity wind-down’. It also contains the PRA’s final policy, as follows:
  • Supervisory Statement (SS) 1/22 ‘Trading activity wind-down’ (Appendix 1);
  • Statement of Policy (SoP) ‘Trading activity wind-down’ (Appendix 2); and
  • updated SS9/17 ‘Recovery Planning’ (Appendix 3).

This PS is relevant to, although may not apply directly, to all PRA-authorised UK banks, their qualifying parent undertakings and PRA-designated investment firms that are engaged in trading activities, and relevant third country branches. This PS is also relevant to policymakers and practitioners that would expect to be involved in a firm’s resolution. It is not relevant to credit unions.

Summary of responses

The PRA received four responses to the CP. Respondents generally supported the purpose of the TWD policy. Respondents made a number of observations and requests for clarification which are set out in Chapter 2.

Implementation and next steps

Firms will be expected to meet the expectations in SS1/22 by Monday 3 March 2025.

The PRA supervisors will engage with TWD firms throughout the period until the TWD policy expectations come into force. Supervisors will want to understand that firms are making adequate preparations significantly in advance of the implementation date and have oversight of progress to implementation. Firms should expect this dialogue to commence in H2 2022, with the exact timing to be confirmed by PRA supervisors.

References related to the UK’s membership of the EU in the SS and SoP covered by the policy in this PS have been updated as part of this PS to reflect the UK’s withdrawal from the EU. Unless otherwise stated, any remaining references to EU or EU-derived legislation refer to the version of that legislation which forms part of retained EU law.

Policy Statement 4/22

Appendix


CP20/21 – Trading activity wind-down

Published on 8 October 2021

Overview

This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed expectations in respect of firms’ engagement in trading activities that may affect the financial stability of the UK. It also proposes that firms engaged in trading activities be able to carry out a full or partial orderly wind-down of their trading activities in recovery and post-resolution restructuring. In this CP, the wind-down of trading activities, whether it be full or partial, or whether it would be carried out as a recovery or post-resolution restructuring option, is referred to as ‘the TWD option’.

The proposals in this CP would result in a new Supervisory Statement (SS) on trading activity wind-down (TWD) (Appendix 1), a Statement of Policy (SoP) (Appendix 2), and amendments to SS9/17 ‘Recovery Planning’ (Appendix 3). The amendments to SS9/17 are in respect of the orderly wind-down of trading activities.

The proposed expectations in this CP are relevant, although may not apply directly, to all PRA-authorised UK banks, their qualifying parent undertakings and PRA-designated investment firms that are engaged in trading activities, and relevant third country branches (more detail on the proposed application of the expectations can be found in Chapter 2). This CP is also relevant to policymakers and practitioners that would expect to be involved in a firm’s resolution. It is not relevant to credit unions.

Implementation

The PRA proposes that the implementation date for the changes resulting from this CP would be Wednesday 1 January 2025.

Subject to consultation responses, the PRA intends to publish its final policy in H1 2022.

Responses and next steps

This consultation closes on Friday 21 January 2022. The PRA invites responses to the proposals set out in this consultation. Please address any comments or enquiries to CP20_21@bankofengland.co.uk.

References related to the UK’s membership of the EU in the draft SS and draft SoP covered by this CP have been updated as part of these proposals to reflect the UK’s withdrawal from the EU. Unless otherwise stated, any remaining references to EU or EU-derived legislation refer to the version of that legislation which forms part of retained EU law.

Consultation Paper 20/21

Appendices

Appendix 1: Draft TWD Supervisory Statement

Appendix 2: Draft TWD Statement of Policy

SS Appendices

Appendix 1: Template A

Appendix 2: Template A instructions

Appendix 3: Template B

Appendix 4: Template B instructions

Appendix 5: Template C

Appendix 6: Template C instructions

Appendix 7: Template D

Appendix 8: Template D instructions

Appendix 9: Template E

Appendix 10: Template E instructions

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