PRA Regulatory Digest - November 2018

The PRA Regulatory Digest is for people working in the UK financial services industry and highlights key regulatory news and publications delivered for the month.
Published on 03 December 2018

News and speeches

‘From construction to maintenance: patrolling the ring-fence’ – speech by James Proudman

26 November 2018

The PRA published ‘From construction to maintenance: patrolling the ring-fence’ a speech by James Proudman, Executive Director of UK Deposit Takers Supervision, about ring-fencing (also referred to as ‘Structural reform’) and its implications for the bank and the PRA. For more information on ring-fencing see the Structural reform webpage.

Cyborg supervision – the application of advanced analytics in prudential supervision – speech by James Proudman

19 November 2018

This speech by James Proudman, Executive Director of UK Deposit Taker Supervision, explores the impact of artificial intelligence, and advanced analytics more broadly, on the safety and soundness of the firms the PRA supervise.

PRA imposes financial penalty on Mr Akira Kamiya and Mr Takami Onodera for failure to disclose information

19 November 2018

Following the PRA’s 9 February 2017 Final Notice in which the PRA imposed financial penalties on The Bank of Tokyo-Mitsubishi (BTMU) £17.85m and MUFG Securities EMEA plc £8.925m, the PRA has today:

  1. imposed a financial penalty on Mr Akira Kamiya, former Chair of Mitsubishi UFJ Securities International plc1 (MUS (EMEA)), of £22,700; and
  2. imposed a financial penalty on Mr Takami Onodera, former Non-Executive Director of MUS (EMEA), of £14,945.

See the Press release for more information.

Cross-cutting publications and updates

Internalised settlement reporting under EU Central Securities Depositories Regulation (CSDR) - letter to UK firms

15 November 2018

The Bank, with the help of the PRA and FCA, is writing to UK firms to ensure that they are aware of the requirement introduced by the EU Central Securities Depositories Regulation that firms that carry out settlement activity outside central securities depositories (CSDs) report data quarterly on this activity to the Bank of England. The letter asks firms to confirm by Monday 31 December 2018 whether they would be captured by this reporting obligation, and to provide contacts details for further, direct, communication. Further information, including a link to the letter, is available on the Financial market infrastructure supervision webpage.

Changes to supervising remuneration compliance for Level One firms

15 November 2018

In line with the PRA’s recent letter to Chairs of the Remuneration Committees ‘Change to supervising remuneration compliance for Level One firms’, the PRA has updated the language within the Level 1 RPS template and data tables. These are available under ‘Self-assessment templates and tables’, on the Strengthening accountability webpage.

PS29/18 ‘Securitisation: The new EU framework and Significant Risk Transfer’

15 November 2018

This Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 12/18 ‘Securitisation: The new EU framework and Significant Risk Transfer’ (see page 2 of 2). It also contains the PRA’s final policy, as follows:

Different parts of the PS are relevant to different firms, depending on whether the policy relates to the implementation of the EU Securitisation Regulation, revisions to the banking securitisation capital framework, or Significant Risk Transfer (SRT) securitisation. Policy relating to the implementation of the Securitisation Regulation will be relevant to all PRA-authorised CRD IV firms and all PRA-authorised Solvency II firms (and potentially other firms pending HM Treasury discretions). Policy relating to the revision to the banking securitisation capital framework and SRT securitisation will be relevant to PRA-authorised CRD IV firms only.

CP28/18 ‘PRA fees and levies: Changes to periodic and transaction fees’

14 November 2018

This CP sets out the PRA proposals relating to:

  • periodic fees for designated investment firms (DIFs);
  • Part VII transaction fees for insurers;
  • internal model application fees for insurers;
  • internal model application and model maintenance fees for DIFs;
  • rules relating to the provision of relief from PRA fees in exceptional circumstances; 
  • other minor corrections to PRA fees rules; and
  • updates to SS3/16 ‘Fees: PRA approach and application’.

This CP is relevant to all PRA-regulated firms but particularly insurers and DIFs, as well as firms which have, or intend to apply in the future for, Solvency II or Capital Requirements Regulation (CRR) models. This CP is in addition to the usual, annual consultation on fees.

PRA Direction ‘Temporary permission and variation: notification before exit day’

7 November 2018

Following the legislation implementing the temporary permissions regime, the PRA issued a PRA Direction ‘Temporary permission and variation: notification before exit day’ – see the Temporary permissions regime webpage for more information.

Banking publications and updates

PRA published 2018 list of systemically important institutions (O-SIIs) and global systemically important institutions (G-SIIs)

29 November 2018

The PRA published it’s 2018 list of UK firms designated as other systemically important institutions (O-SIIs), as required under the Capital Requirements Directive (2013/36/EU) (CRD) as implemented in the Capital Requirements (Capital Buffers and Macro-prudential measures) Regulations 2014.

In accordance with Article 131 of the Capital Requirements Directive (2013/36/EU) (CRD), the PRA also disclosed the 2018 list of UK headquartered Global Systemically Important Institutions (G-SIIs).

These buffers will apply from 1 January 2020. Both updates can be found on the Capital Requirements Directive webpage.

CP29/18 ‘The systemic risk buffer: Updates to the Statement of Policy’

22 November 2018

In the CP the PRA proposes minor updates to its Statement of Policy ‘The PRA’s approach to the systemic risk buffer’.

The CP is relevant to ring-fenced bodies within the meaning of section 142A of the Financial Services and Markets Act 2000 (FSMA) and large building societies that hold more than £25 billion in deposits (where one or more of the account holders is a small business) and shares (excluding deferred shares) – jointly ‘SRB institutions’.

Given the minor nature of the proposed updates, this consultation closes on Thursday 6 December 2018.

PS28/18 ‘UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer’

14 November 2018

This PS provides feedback to responses to CP14/18 ‘UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer’. It also contains the PRA’s final policy to update:

The Leverage Ratio, Public Disclosure, Reporting Leverage Ratio, and Ring-fenced Bodies Parts of the PRA Rulebook (Appendix 1);
SS45/15 ‘The UK leverage ratio framework’ (Appendix 2);
SS46/15 ‘UK leverage ratio: instructions for completing data items FSA083’ (Appendix 3); and
FSA083 Leverage Ratio Reporting template, and reporting instructions (Appendix 4).

This PS is relevant to those firms in scope of the UK leverage ratio framework that are also systemic risk buffer (SRB) institutions, or part of a group containing an SRB institution.

CP19/18 ‘Regulatory reporting: EBA Taxonomy 2.9’

12 November 2018

Paragraphs 3.7 and 3.8 have been updated to provide further information on the cost benefit analysis.

This consultation closes on Wednesday 12 December 2018.

PRA110 Q&As (version 2) published

9 November 2018

The PRA published version 2 of the PRA110 Q&As which has been updated to include responses on questions related to: technical implementation; the LCR weights; and memorandum items. This supersedes the version previously published on Friday 28 September 2018. The Q&As are in response to a number of additional questions from firms regarding the template and reporting instructions. For more information see the Interim reporting of PRA110 section.

IFRS 9 Roundtable for Non-Systemic Banks and Building Societies

8 November 2018

Melanie Beaman, Director of UK Deposit Takers, hosted an International Financial Reporting Standards (IFRS) 9 roundtable for non-systemic banks and building societies on Thursday 8 November 2018.

This roundtable was largely an opportunity for firms to talk to the PRA and share their experience regarding embedding IFRS 9 into their capital planning.

Insurance publications and updates

Templates A and B ‘Solvency II templates for the disclosure of aggregate statistical data year-end 2017’

13 November 2018

The PRA published templates A and B as required under Article 31(2) of the Solvency II Directive. The information is available on the ‘Solvency II templates for the disclosure of aggregate statistical data year-end 2017’ webpage and accurate for year-end 2017 as at Tuesday 21 August 2018.

PS27/18 ‘Strengthening accountability: implementing the extension of the SM&CR to insurers (Part 2)’

9 November 2018

This PRA PS provides feedback to responses to CP20/18 ‘Strengthening accountability: implementing the extension of the SM&CR to insurers (Part 2)’. It also provides the final set of rules for the implementation of the extension of the Senior Managers and Certification Regime (SM&CR, ‘the regime’) to insurers.

This PS is relevant to all Solvency II insurance firms (UK Solvency II firms, the Society of Lloyd’s and managing agents, and third country (re)insurance branches), and to insurance special purpose vehicles (ISPVs), large non-Directive firms (NDFs),  small NDFs  and Swiss general insurers.

Letter from Anna Sweeney ‘Market conditions facing specialist general insurers: Feedback from recent PRA review work’

8 November 2018

Following the letter from Anna Sweeney ‘Market conditions facing specialist general insurers: Feedback from recent PRA review work’, the PRA received responses from firms, which supervisors have followed up individually with the CEOs of Category 1-3 firms operating in the London Market. The letters included the PRA’s overall impression of the market’s reaction to the letter, a version of which is available on the webpage, under ‘Overall’.

Also in the month

21 November 2018

2 November 2018

These items are selected from Latest Bank of England news. Readers may also find it useful to refer to the Statistics and Research sections of the Bank’s website.

Bank Underground

Bank Underground is a blog for Bank of England staff to share views that challenge – or support – prevailing policy orthodoxies. The views expressed here are those of the authors, and are not necessarily those of the Bank of England or its policy committees.

View Bank Underground blog posts.

KnowledgeBank

This month, KnowledgeBank includes a guide on: ‘What do you need to know about debt?’

From interest rates and inflation through to bank failures and financial crises, KnowledgeBank uses everyday examples and engaging visuals to bring economics to life.

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