PRA Regulatory Digest - October 2019

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 01 November 2019

Top news and publications

  • Credit union meets robot – speech by Sam Woods
  • Memorandum of Understanding (MoU) between HM Treasury, the Bank of England (Bank), PRA and FCA

News and speeches

Credit union meets robot – speech by Sam Woods

24 October 2019

Sam Woods, Deputy Governor for Prudential Regulation, and CEO of the PRA, gave a speech ‘Credit union meets robot’ at Mansion House, London. Alongside the speech, the PRA published CP28/19 ‘Credit unions: Review of the capital regime’ (see below)

Cross cutting publications and updates

Updated Bank and Insurance application forms and guidance

24 October 2019

On Thursday 24 October the PRA and FCA published new stand-alone application forms for third country branches, for both banks and insurers. Previously, new firms used the same application form, irrespective of whether they were a subsidiary, a start-up or a third country branch. The new forms are available on New Firms Authorisations webpage.

Memorandum of Understanding (MoU) between HM Treasury, the Bank of England (Bank), PRA and FCA

17 October 2019

The PRA, HM Treasury, and the Financial Conduct Authority (FCA) published a MoU between HM Treasury, Bank, PRA and FCA. This sets out how the parties to the MoU expect to coordinate their respective functions in relation to equivalence and exemption determinations. These are new functions that will be transferred to UK authorities in the context of the UK’s withdrawal from the European Union and will come into effect from exit day.

Machine learning in UK financial services

16 October 2019

The Bank of England and the Financial Conduct Authority published a joint report on ‘Machine learning in UK financial services’.

Letter from Lyndon Nelson to the Chair of the Treasury Select Committee, regarding IT failures in the financial services sector

8 October 2019

HM Treasury published a letter from Lyndon Nelson, Deputy CEO of the PRA, and Executive Director Supervisory Risk Specialists and Regulatory Operations, to the Chair of the Treasury Select Committee, regarding IT failures in the financial services sector.

CP25/19 ‘Occasional Consultation Paper – October 2019’

7 October 2019

This Consultation Paper (CP) proposes minor amendments to PRA Rulebook Parts, supervisory statements (SSs), statements of policy (SoPs) and the relevant templates.

The chapters in this CP are relevant to different firms, as follows:

  • Chapters 2 and 5 - all firms to which CRD IV applies, and Chapter 2 additionally to building societies;
  • Chapter 3 - UK banks, building societies, credit unions, PRA-designated investment firms, UK Solvency II insurance firms, third country insurance branches within the scope of the PRA’s rules transposing the Solvency II Directive, and the Society of Lloyd's and managing agents; and
  • Chapter 4 – Reporting updates; UK banks, building societies and PRA-designated investment firms.

The consultation period for Chapter 4 of this CP closes on Monday 18 November 2019. The consultation period for the remaining chapters closes on Monday 9 December 2019.

Reminder: Waiver by consent on Continuity of Access rules

13 September 2019

The PRA published a new waiver by consent to waive the Continuity of Access requirements contained in the Depositor Protection Part of the PRA Rulebook. The existing waivers for those rules ends on Sunday 1 December 2019. Eligible firms are encouraged to request the new waiver by consent before Monday 11 November 2019 to enable processing. More information is available on the Authorisations – Waivers and modifications of rules page.

PS23/19 ‘Enforcement: Changes to the PRA’s settlement policy’

4 October 2019

This PRA Policy Statement (PS) provides the final SoP ‘The PRA’s approach to enforcement: Statutory statements of policy and procedure’, as consulted in CP10/19 ‘Enforcement: Changes to the PRA’s settlement policy’.

This PS is relevant to PRA-authorised persons, qualifying parent undertakings, persons who are or have been auditors or actuaries of a PRA-authorised person, senior managers and certified employees at firms, and all individuals involved in providing financial services to PRA-authorised persons. 

Further information

Banking publications and updates

Letter from Sarah Breeden and David Bailey ‘Reliability of regulatory returns’

31 October 2019

The PRA published a letter 'reliability of regulatory returns' from Sarah Breeden, Executive Director of UK Deposit Takers Supervision, and David Bailey, Executive Director of International Banks Supervision, to CEOs of PRA-regulated banks and building societies.

CP28/19 ‘Credit unions: Review of the capital regime’

24 October 2019

In this CP, the PRA sets out its proposed changes to the capital requirements that apply to credit unions. The proposals would result in amendments to the Credit Union Part of the PRA Rulebook and SS2/16 ‘The prudential regulation of credit unions’.

The CP is relevant to all UK credit unions.

This consultation closes on Friday 24 January 2020.

CP27/19 ‘Liquidity: The PRA’s approach to supervising liquidity and funding risks’

17 October 2019

In this CP, the PRA sets out proposals to update SS24/15 ‘The PRA’s approach to supervising liquidity and funding risks’ to reflect relevant updates to the Bank of England’s Market Operations Guide and to reiterate relevant expectations set out in SS9/17 ‘Recovery Planning’

This CP is relevant to PRA-authorised UK banks, building societies, and PRA-designated UK investment firms.

This consultation closes on Sunday 17 November 2019.

Reminder: Cash flow mismatch risk (CFMR) framework

17 October 2019

Firms are reminded that, as set out in SS24/15 ‘The PRA’s approach to supervising liquidity and funding risks’ (paragraph 3.12, footnote 10), the PRA will provide at least two months’ notice of the date from which firms should survive throughout the granular LCR stress scenario (30 day horizon) of the CFMR framework on a consolidated currency basis.

The PRA reiterates that this guidance will not apply from Wednesday 1 January 2020. This will ensure both firms and the PRA have an opportunity to review reporting and relevant monitoring metrics produced using the amended PRA110 reporting template that will take effect from Wednesday 1 January 2020.

Notice of the date of application of the guidance outlined in SS24/15 (paragraph 3.12) will be provided through an update on the PRA website in due course, in accordance with PS13/19 ‘Pillar 2 liquidity: Updates to the framework’ (paragraph 2.19).

PS24/19 ‘Large exposures: Reciprocation of French measure’

15 October 2019

This PS provides the PRA’s final rule following CP15/19 ‘Large exposures: Reciprocation of French measure’.

The measure described in this PS applies on a consolidated basis to firms identified by the PRA as global systemically important institutions and other systemically important institutions, under the Capital Requirements Directive (2013/36/EU) as implemented in the Capital Requirements (Capital Buffers and Macro-prudential measures) Regulations 2014. This PS is therefore relevant to such firms and their subsidiaries.

New Bank Start-up Unit seminar slides

15 October 2019

The PRA and FCA held the New Bank Start-up Unit (NBSU) seminar on Tuesday 15 October 2019. The Seminar slides are available on the NBSU webpage.

FCA published an update to firms on a new platform to collect data

14 October 2019

On 16 July 2019 the FCA published an update to firms announcing a new platform to improve the way data is collected from firms, which will include replacing Gabriel, and opened a survey for users of Gabriel. The FCA has now published an update on the three key areas of improvement that they will focus on following user feedback.

The PRA continue to work with the FCA on improvements to the shared Gabriel system. For more information or to take part in the survey see the FCA’s website.

PRA110 liquidity metric monitor tool and Q&A

3 October 2019

The PRA published a further update (version 01.03) to the PRA110 liquidity metric monitor tool (PRA110 LMM tool), the PRA also published a new PRA110 LMM tool (Version 02.01) and version 7 of the PRA100 Q&A. For more information see the Regulatory reporting – banking sector Banks, building societies and investment firms webpage.

Letter from Victoria Saporta: Written auditor reporting – thematic feedback from the 2018/2019 reporting period

2 October 2019

The PRA published a letter ‘Written auditor reporting – thematic feedback from the 2018/2019 reporting period’ from Victoria Saporta, Executive Director of Prudential Policy sent to Chief Financial Officers of selected deposit-takers.

Further information

For information on banking regulatory returns and how to report them, visit the Regulatory reporting – banking sector page.

For details of forms used to collect data through the online statistical data application (OSCA), visit the Forms, definitions, and validation page.

Insurance publications and updates

The European Insurance and Occupational Pensions Authority (EIOPA) Solvency II 2020 Review data request

31 October 2019

In January, the European Commission released its Call for Advice, setting out the scope of its Solvency II 2020 Review. On Wednesday 16 October, the European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper, setting out its proposed responses to the European Commission’s Call for Advice, including proposed reforms to Solvency II. As part of this, EIOPA also launched a data request, the primary purpose of which is to test the impact of its proposed reforms.

Some industry participants may already be aware of this data request, and the PRA is in the process of contacting a number of firms directly. This notice promotes wider awareness of this voluntary data request, and the Solvency II 2020 Review more generally.

v1.1.0 Bank of England Insurance XBRL taxonomy

14 October 2019

The PRA published v1.1.0 of the Bank of England Insurance XBRL taxonomy, alongside related artefacts. This taxonomy is to be used for the collection of National Specific Templates, internal model output, market risk sensitivities and standard formula for firms with an approved internal model (SF.01) reporting which follows PS21/19 ‘Responses to CP13/19 ‘Occasional Consultation Paper’, published on Monday 30 September 2019. This will take effect from Wednesday 30 November 2019. For more information see the Regulatory reporting – insurance sector.

CP26/19 ‘Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion’

11 October 2019

In this CP, the PRA proposes to amend its expectation on the treatment of restricted Tier 1 own funds instruments in the light of recent information from HMRC. The proposals would make amendments to SS3/15 ‘Solvency II: the quality of capital instruments.’

To reflect any changes to SS3/15 following this consultation the PRA would also update the reporting clarification published as Appendix 2 to PS4/19 ‘Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on write down’.

The CP is relevant to UK insurance firms within the scope of Solvency II, the Society of Lloyd’s, and firms that are part of a Solvency II group that will determine and classify capital instruments under the Solvency II own funds regime, together with their advisors.

Further information

For information on insurance regulatory returns and how to report them, visit the Regulatory reporting – insurance sector page.

Your inputs and views on open PRA consultations and other requests closing in November 2019

Closing date: 17 November

Closing date: 18 November

While not a consultation paper, the cross-industry working group requests comments and view on ‘A framework for assessing financial impacts of physical climate change: a practitioner’s aide for the general insurance sector’

Closing date: 22 November

Also in the month

29 October 2019

21 October 2019

18 October 2019

14 October 2019

10 October 2019

8 October 2019

8 October 2019

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European and international developments

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