PRA Regulatory Digest - December 2020

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 04 January 2021

Top news and publications

  • PS30/20 ‘The Bank of England’s amendments under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period’
  • PS29/20 ‘Capital Requirements Directive V (CRD V)’

Regulatory measures for PRA firms in response to coronavirus

Delay to the proposed effective date for policy resulting from CP11/20 ‘Solvency II: The PRA’s expectations for the work of external auditors on the matching adjustment’

15 December 2020

The PRA announces a delay to the proposed effective date set out in paragraph 1.12 of Consultation Paper (CP) 11/20 ‘Solvency II: The PRA’s expectations for the work of external auditors on the matching adjustment’. As such, the PRA confirms that any finalised approach will therefore not be effective for audits of the Solvency and Financial Condition Reports (SFCRs) with a Thursday 31 December 2020 reporting date.

Following the recent closure of the comment period for CP11/20, the delay to the proposed effective date takes into account feedback from respondents, including in relation to the impact of Covid. The communication of a delay at this time is designed to provide clarity and certainty for auditors and firms in relation to the audits of December year-end SFCRs.

Statement by the PRA on Covid guidance for firms

9 November 2020

This statement replaces previous guidance relating to coronavirus measures for PRA-regulated firms, in light of updates from UK Government.

PRA decision on Systemic Risk Buffer Rates

7 December 2020

In response to the ongoing economic shock from Covid the PRA has decided, with the support of the Financial Policy Committee, to extend its decision to maintain firms’ Systemic Risk Buffer (SRB) rates at the rate set in December 2019 for a further year. This decision follows the PRA’s announcement in April that rates would be maintained at 2019 levels until December 2021.

News and speeches

The fox and the hedgehog: preparing in a world of high risk and high uncertainty – speech by Charlotte Gerken

3 December 2020

The PRA’s stress tests on UK insurance firms can help them stay resilient says Charlotte Gerken. She sets out the PRA’s stress tests plans for the insurance industry in 2021 and 2022.

Cross cutting publications and updates

PS30/20 ‘The Bank of England’s amendments under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period’

28 December 2020

This Policy Statement (PS) contains the final PRA Rulebook (EU Exit) Instrument (Appendix 1), PRA transitional direction (Appendix 2), and related guidance documents (Appendices 4–7).

This PS is relevant to all firms authorised and regulated by the PRA. Some of the changes are also relevant to firms authorised and regulated by the Financial Conduct Authority (FCA), and to the Financial Services Compensation Scheme (FSCS). This PS and the accompanying materials may also be relevant to firms applying to the PRA or FCA for authorisation.

The PRA’s transitional direction will commence on ‘IP completion day’, which is defined in UK law as 11pm on Thursday 31 December 2020.

The Bank and PRA may issue further statements in relation to this topic, including in relation to any EU materials issued after the publication of this statement.

Further information

Banking publications and updates

PS29/20 ‘Capital Requirements Directive V (CRD V)’

28 December 2020

This PS provides the final policy to CP22/20 ‘Designation of firms within certain consolidation groups’. It also contains final PRA Rulebook instruments, Statements of Policy (SoP), Supervisory Statements (SS), and templates as published in near-final form in PS26/20 ‘Capital Requirements Directive V (CRD V)’, set out in the appendices to this PS.

This PS is relevant to UK banks, building societies, and PRA-designated investment firms, as well as UK financial holding companies, and UK mixed financial holding companies.

Evaluation of the Senior Managers and Certification Regime (SM&CR)

16 December 2020

This report sets out the findings of a PRA evaluation that reviewed the implementation of the SM&CR, to assess how it is delivering against its original objectives.

Letter from Sarah Breeden and Melanie Beaman ‘UK Deposit Takers Supervision: 2021 Priorities’

15 December 2020

Letter from David Bailey and Rebecca Jackson ‘International Banks Supervision: 2021 Priorities’

15 December 2020

PRA statement on capital distributions by large UK banks

10 December 2020

At the end of March 2020, the PRA welcomed the decisions of the boards of the large UK banks to suspend dividends and buybacks on ordinary shares until the end of 2020.

CP22/20 ‘Designation of firms within certain consolidation groups’

9 December 2020

This CP sets out the PRA’s proposed approach to designating entities within certain banking UK consolidation groups as responsible for ensuring that consolidated prudential requirements are met during a transitional period.

The PRA proposes to create a new Part of the PRA Rulebook (the Designation Part).

This CP is relevant to banks and PRA-designated investment firms that are part of a UK consolidation group controlled by a UK parent financial holding company or a UK parent mixed financial holding company.

This consultation closed on Wednesday 16 December 2020.

PS26/20 ‘Capital Requirements Directive V (CRD V)’

9 December 2020

This PS provides feedback to responses to CP12/20 ‘Capital Requirements Directive V (CRD V)’ and CP17/20 ‘Capital Requirements Directive V (CRD V): Further implementation’. It also contains near-final Rules instruments, SoP, SS, and templates. 

The appendices to the PS provide links to the near-final policy material.

This PS is relevant to UK banks, building societies, and PRA-designated investment firms, and UK financial holding companies and UK mixed financial holding companies of certain PRA-authorised firms.

PS25/20 ‘Simplified Obligations for recovery planning’

7 December 2020

This PS provides feedback to responses to CP10/20 ‘Simplified Obligations for recovery planning’. It also contains the PRA’s final policy, in the form of the updated SS9/17 ‘Recovery planning’.

This PS is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms, and their qualifying parent undertakings (firms), to which the Recovery Plans Part of the PRA Rulebook applies. The policy is likely to be of particular interest to smaller and non-systemic firms that do not perform critical functions.

CP23/20 ‘Joint PRA and FCA Chapter ‘Clarifying our expectations for temporary, long-term absences’ within the FCA Quarterly Consultation Paper’

4 December 2020

The PRA and FCA propose to clarify their expectations for firms notifying them of when a Senior Manager takes temporary leave for longer than 12 weeks (long-term leave), for example in cases of parental leave and where the length of absence is not known.

This CP is relevant to all PRA-authorised firms.

The full consultation paper is hosted on the FCA’s website. The consultation closing date is Thursday 4 February 2021.

Statement regarding supervisory cooperation on operational resilience

3 December 2020

The PRA recognises the global and interconnected nature of banks and the importance of supervisory coordination and is committed to working closely with the European Central Bank and the Federal Reserve to ensure that supervisory approaches on operational resilience are well coordinated.

CP21/20 ‘PRA fees and levies: Holding company regulatory transaction fees’

2 December 2020

This CP sets out the PRA’s proposed rules in respect of regulatory transaction fees for applications for approval or exemption as a holding company.

The proposals in this CP would result in changes to the Fees Part of the PRA Rulebook.

The CP is relevant to PRA-authorised banks, PRA-designated investment firms, and their parent undertakings, which for this purpose comprise financial holding companies (FHC) and mixed financial holding companies (MFHC), as well as those intermediate holding companies that sit at the top of a sub-consolidation group. It is not relevant to credit unions or insurers.

This consultation closes on Friday 8 January 2021.

Further information

Insurance publications and updates

Letter from Anna Sweeney and Charlotte Gerken ‘Insurance Supervision: 2021 Priorities’

15 December 2020

PS24/20 ‘Solvency II technical information: The PRA’s proposed approach to the publication at the end of the transition period’

2 December 2020

This PS provides feedback to responses to CP5/20 ‘Solvency II technical information: The PRA’s proposed approach to the publication at the end of the transition period’. It also contains the PRA’s final policy in SoP ‘The PRA’s approach to the publication of Solvency II technical information’.

This PS is relevant to all UK Solvency II firms, including in respect of the Solvency II groups provisions, and to the Society of Lloyd’s and its managing agents. Non-Solvency II firms are out of the scope of this PS.

Further information

Your input and views on open PRA consultations and other requests closing in January 2021

Closing date: 8 January

Closing date: 12 January

Closing date: 30 January

Closing date: 31 January

Closing date: 31 January

Also in the month

9 December 2020

4 December 2020

2 December 2020

24 November 2020

16 November 2020

More information

Bank Underground - 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.

Bank Overground - the purpose of Bank Overground is to share our internal analysis. Each bite-sized post summarises a piece of analysis that supported a policy or operational decision. In November Bank Overground published ‘How has Covid affected household savings?’ and ‘Buy-to-let mortgages: how do lenders account for tax when assessing affordability?’

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

European and international developments - readers are also referred to the following websites:

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