PRA Regulatory Digest - July 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 03 August 2020

Top news and publications

  • Regulatory measures for firms in response to Covid-19
  • Letter from Sam Woods ‘Managing climate-related financial risk – thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarifications of expectations’
  • PS16/20 ‘Regulated fees and levies: Rates proposals 2020/21’
  • Climbing mountains safely – speech by Sarah Breeden
  • Leading the change: climate action in the financial sector – speech by Sarah Breeden

Regulatory measures for firms in response to Covid-19

Statement by the PRA on EBA Guidelines on reporting and disclosure of exposures subject to measures applied in response to the Covid-19 outbreak

28 July 2020

The PRA published ‘Statement by the PRA on EBA Guidelines on reporting and disclosure of exposures subject to measures applied in response to the Covid-19 outbreak’ which sets out how the EBA disclosure requirements are to be implemented and how firms should submit their disclosures, following the previous statements dated Wednesday 24 June and Friday 10 July 2020. The disclosure template was published alongside this statement. 

PRA statement on dividend payments and share buybacks beyond 2020

28 July 2020

The PRA published ‘PRA statement on dividend payments and share buybacks beyond 2020’, following the European Central Bank’s announcement on dividend payments and share buybacks.

PRA statement to insurers on the application of the matching adjustment during Covid-19

7 July 2020

The PRA published ‘PRA statement to insurers on the application of the matching adjustment during Covid-19’, which clarifies the PRA’s approach to the application of the matching adjustment during Covid-19.

News and speeches

Climbing mountains safely – speech by Sarah Breeden

22 July 2020

Sarah Breeden discusses a proposed new guide for banks – a guide that is designed to help new and growing banks scale the mountain from initial authorisation to becoming an established player in the banking market. Read more on the proposals in CP9/20, under ‘banking publications and updates’.

Leading the change: climate action in the financial sector – speech by Sarah Breeden

1 July 2020

As part of London Climate Action Week 2020, Sarah delivered a speech at a UK Finance web event on how the Financial Sector can draw on the recent work of the Bank, Climate Financial Risk Forum (CFRF), and Network for Greening the Financial System (NGFS) to move beyond rhetoric and help make climate action a reality. Read more on climate change in Sam Woods’ letter to all PRA-regulated firms, under ‘cross-cutting publications’.

Cross-cutting publications and updates

PS17/20 ‘Responses to Occasional Consultation Paper 3/20 – Chapter 8: Securitisation: Updates to Significant Risk Transfer’

22 July 2020

This PRA Policy Statement (PS) provides the final policy for Chapter 8 of Consultation Paper (CP) 3/20 ‘Occasional Consultation Paper – March 2020’. The PRA received no responses to this chapter of the consultation, and has made no changes to draft policy. However, it is taking the opportunity to update a footnote reference to include the date this SS is being updated.

This PS provides updates to Supervisory Statement 9/13 ‘Securitisation: Significant Risk Transfer’.

This PS is relevant to Capital Requirements Regulation firms.

CP8/20 ‘Complaints against the regulators (the Bank of England, the FCA and the PRA)’

21 July 2020

This Financial Conduct Authority, PRA, and Bank of England CP sets out proposed changes to their joint complaints scheme (the Scheme). The Scheme was set up under the Financial Services Act 2012 to cover the procedures for handling complaints against the regulators themselves (as opposed to complaints against regulated firms), and to describe the role of the independent Complaints Commissioner.

This consultation may be of interest to anyone who is a potential or actual complainant under the Scheme. This includes regulated businesses and consumers of financial services. It may also be of interest to consumer advocates and action groups, trade associations, journalists and politicians, among others.

This consultation closes on Monday 14 September 2020. The full consultation paper is hosted on the FCA’s website.

CP7/20 ‘Strengthening Accountability: SM&CR Forms update’

13 July 2020

This CP, sets out the PRA’s proposals to make minor amendments to the PRA Rulebook, Notifications Form and Senior Manager & Certification Regime (SM&CR) Form L.

The proposals in this CP would result in changes to the Notifications Part of the PRA Rulebook, the Notification Form, and the SM&CR Form L.

This CP is relevant to all PRA-authorised firms. The consultation closes on Tuesday 13 October 2020.

Letter from Sam Woods ‘Managing climate-related financial risk – thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarifications of expectations’

1 July 2020

The PRA published a letter from Sam Woods to all PRA-regulated firms on ‘Managing climate-related financial risk – thematic feedback from the PRA’s review of firms’ SS3/19 plans and clarifications of expectations’. The PRA published a speech by Sarah Breeden alongside this – ‘Leading the change: Climate Action in the Financial Sector’. More information on the speech is available under ‘News and speeches’.

Banking publications and updates

CP12/20 ‘Capital Requirements Directive V (CRD V)’

31 July 2020

This CP sets out proposed changes to the PRA’s rules, SS and Statements of Policy (SoP) in order to implement elements of the Capital Requirements Directive (CRD V).

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

There are a number of different considerations with respect to implementation of the changes being consulted on in this CP. Please see chapter 3 of the CP for full details.

Banking supervisory disclosures

31 July 2020

On Friday 31 July 2020, the PRA published the aggregate statistical data as at Tuesday 31 December 2019.

The PRA is required, as a competent authority, to publish information on rules and guidance, options and discretions, supervisory review and evaluation process (SREP), and aggregate statistical data, alongside submitting the information to the European Banking Authority (EBA) in line with Article 143 of Directive 2013/36/EU (CRD IV) and Commission Implementing Regulation 650/2014.

Please see the Banking supervisory disclosures page for more information.

PS18/20 ‘Asset encumbrance’

27 July 2020

This PRA PS provides feedback to responses to CP24/19 ‘Asset encumbrance’. It also contains updated versions of:

This PS is relevant to all PRA-regulated firms, except credit unions and insurance firms.

Reminder: Firm feedback survey

24 July 2020

The PRA proactively seeks input from firms on the effectiveness and quality of its supervisory framework and approach. One of the ways it does this is through the annual firm feedback survey. The survey gives PRA-authorised firms the opportunity to comment on a number of topics.

Each year a sample of small and medium-sized firms are also invited to complete the survey and a selection of these are invited to participate in a roundtable follow-up meeting. The smaller firms being surveyed in 2020 can expect to receive a notification on Wednesday 19 August 2020.

For more information visit the ‘firm feedback survey’ section on the Supervision page.

CP10/20 ‘Simplified Obligations for recovery planning’

23 July 2020

In this CP, the PRA sets out a proposal to allow certain firms to benefit from Simplified Obligations for recovery planning, in light of the discretion the PRA has under 4(1) of the Bank Recovery and Resolution Directive 2014/59/EU (BRRD) as to whether to apply Simplified Obligations.

This CP proposes changes to SS9/17 ‘Recovery planning’ that would reduce expectations for certain firms’ recovery planning.

This CP is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms and their qualifying parent undertakings to which the Recovery Plans Part of the PRA Rulebook applies. This consultation closes on Friday 23 October 2020. 

CP9/20 ‘Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks’

22 July 2020

In this CP, the PRA sets out its proposed approach to supervising new and growing, non-systemic UK banks. All the proposals are clarifications of the PRA’s current supervisory approach with the exception of: (i) proposed changes to the calculation of the PRA buffer for new banks; and (ii) setting expectations in relation to solvent wind down plans.

The proposals in this CP would:

This CP is primarily relevant to new and growing non-systemic UK Banks.

This consultation closes on Wednesday 14 October 2020.

CP6/20 ‘Financial Service Compensation Scheme – Temporary High Balance Coverage Extension’

9 July 2020

This CP sets out the PRA’s proposal to extend coverage under the Financial Services Compensation Scheme (FSCS) for Temporary High Balances (THBs), from six months to twelve months from the date of deposit, or the first date the THB becomes legally transferable to the depositor. The proposed extension of coverage would be for a temporary period, and is being proposed in response to the impact of Covid-19 on residential property and investment markets, and access to banking services for some depositors. THB coverage would revert back to six months from Monday 1 February 2021. 

The policy proposals included in this CP are as follows:

  • to extend THB coverage up until, and including, Sunday 31 January 2021, from six months to twelve months; and
  • to revert back to a six-month THB coverage on Monday 1 February 2021.

This CP is relevant to retail financial consumers who are currently, or who may become, THB depositors before Monday 1 February 2021. This CP is also relevant to the FSCS and to all PRA-authorised deposit-takers. This consultation closed on Thursday 23 July 2020.

PS16/20 ‘Regulated fees and levies: Rates proposals 2020/21’

7 July 2020

This PRA PS provides feedback to responses to CP4/20 ‘Regulated fees and levies: Rates proposals 2020/21’. It also contains the PRA’s final policy, as follows:

  • the fee rates to meet the PRA’s 2020/21 Annual Funding Requirement (AFR) for the financial period Sunday 1 March 2020 to Sunday 28 February 2021;
  • amendments to the Fees Part of the PRA Rulebook; and
  • updates to SS3/16 ‘Fees: PRA approach and application’.

This PS is relevant to all firms that currently pay PRA fees or are expecting to do so within the 2020/21 fee year.

PRA statement on Libor transition and PRA resolution-related rules

7 July 2020

The PRA published ‘PRA statement on Libor transition and PRA resolution-related rules’ which outlines the PRA’s view on the implications of Libor transition for contracts in scope of the Contractual Recognition of Bail-In and Stay in Resolution Parts of the PRA Rulebook.

PS15/20 ‘Pillar 2A: Reconciling capital requirements and macroprudential buffers’

6 July 2020

This PRA PS provides feedback to responses to CP2/20 ‘Pillar 2A: Reconciling capital requirements and macroprudential buffers’. It also contains the PRA’s final policy in SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’.

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

Insurance publications and updates

CP11/20 ‘Solvency II: The PRA’s expectations of the work of external auditors on the matching adjustment’

30 July 2020

This CP sets out the PRA proposed expectations and guidance relating to auditors’ work on the matching adjustment (MA). The PRA also proposes several new expectations that relate to the communication by auditors on the subject of the MA.

The proposals in this CP would result in changes to SS11/16 ‘Solvency II: external audit of, and responsibilities of the governing body in relation to, the public disclosure requirement’.

This CP is relevant to UK Solvency II firms (including mutuals) that have approval to make use of the MA.This consultation closes on Friday 30 October 2020.

Further information

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

Also in the month

23 July 2020

16 July 2020

15 July 2020

13 July 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. Since launching in July, Bank Underground have continued to publish a special series of ‘Covid-19 Briefings’.

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.

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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