This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposed rules in respect of the application of prudential liquidity requirements to Domestic Liquidity Sub-Groups (DoLSubs). It also includes proposed revisions to the PRA’s approach to granting a DoLSub permission.
Where certain conditions are met on the availability, distribution, management, and monitoring of liquidity, the Capital Requirements Regulation (CRR) allows the PRA to waive the application of liquidity requirements at the level of an individual firm and to permit a firm to form a DoLSub. Those requirements include the liquidity coverage ratio (LCR), and liquidity risk management, monitoring, reporting, and disclosure. Where a DoLSub permission is granted, PRA requirements apply at the level of a DoLSub on the basis of the consolidated situation of its members, rather than applying to member firms individually. This reflects the ability of some firms to manage their liquidity jointly with other entities, as if they were a single entity. HM Treasury will revoke this provision from Saturday 1 January 2022.
This CP sets out the PRA’s proposal following its further consideration of the conditions for DoLSubs. This CP would result in changes to the Liquidity (CRR) Part of the PRA Rulebook (Appendix 1) and the Statement of Policy (SoP) ‘Liquidity and funding permissions’ (Appendix 2).
This consultation is relevant to PRA-authorised UK banks, PRA-designated UK investment firms, and building societies (hereafter known as ‘firms’). It is also relevant to UK financial or mixed financial holding companies that are the immediate parent undertakings of firms that may be included in a DoLSub. It is not relevant to credit unions.
The PRA proposes that the implementation date for the changes resulting from this CP would be Saturday 1 January 2022, with finalisation of the rules taking place in November 2021.
Responses and next steps
This consultation closes on Tuesday 12 October 2021. The PRA invites feedback on the proposals set out in this consultation. The PRA would also welcome firms’ views on whether there are any significant practical implications of the proposed approach to DoLSubs that the PRA has not identified. Please address any comments or enquiries to CP19_21@bankofengland.co.uk.
References related to the UK’s membership of the EU in the 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.