CP20/21 – Trading activity wind-down

Consultation Paper 20/21
Published on 08 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

Consultation end date: 21 January 2022

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