PRA Regulatory Digest - March 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 01 April 2020

Top news and publications

Regulatory measures for firms in response to Covid-19

Regulatory measures for firms in response to Covid-19

PRA statement on deposit takers’ approach to dividend payments, share buybacks and cash bonuses in response to Covid-19

The PRA welcomes the decisions by the boards of the large UK banks to suspend dividends and buybacks on ordinary shares until the end of 2020, and to cancel payments of any outstanding 2019 dividends in response to a request from the PRA.

Letter from Sam Woods to insurers on distribution of profits

31 March 2020

The PRA published a letter from Sam Woods to insurers on their approach to distribution of profits in response to the Covid-19 outbreak.

Letter from Sam Woods to UK deposit takers on dividend payments, share buybacks and cash bonuses

31 March 2020

The PRA published letters from Sam Woods to the seven largest systemically important UK deposit-takers on their approach to dividend payments, share buybacks and cash bonuses in response to the Covid-19 outbreak.

Statement on VAR back-testing exceptions temporary approach

30 March 2020

The PRA are aware that the exceptional levels of market volatility over the past few weeks has led to an elevated level of VAR back-testing breaches across the industry. In order to mitigate the possibility of procyclical market risk capital requirements through the automatic application of a higher VAR multiplier the PRA will allow firms – on a temporary basis – to offset increases due to new exceptions through a commensurate reduction in risks-not-in-VAR (RNIV) capital requirements.

Statement on exposure value for internal models method counterparty credit risk

30 March 2020

The PRA are aware that some firms have recently experienced significant moves in Counterparty Credit Risk (CRR) risk-weighted assets (RWAs), and the PRA understands these moves are partially attributable to large margin calls following significant intraday market price movements.

Joint statement by the FCA, FRC and PRA

26 March 2020

The PRA, FCA and Financial Reporting Council (FRC) announced on Thursday 26 March a series of actions and issued a series of statements that are intended to:

  • ensure that information continues to flow to investors (and thereby supports the continued functioning of the UK’s capital markets);
  • help companies preparing and auditors auditing financial statements in the current uncertain climate; and
  • help market participants and lenders to respond appropriately to what is likely to be the new normal in terms of audit report modifications and loan covenant breaches.

Letter from Sam Woods ‘Covid-19: IFRS 9, capital requirements and loan covenants’

26 March 2020

The PRA published a letter from Sam Woods to Chief Executive Officers of UK Banks on ‘Covid-19: IFRS 9, capital requirements and loan covenants’.

Statement by the PRA on bank, building society and credit union branches remaining open following updated Covid-19 guidance

24 March 2020

On 23 March 2020, the UK Government issued guidance regarding which businesses should remain closed as part of further social distancing measures. Please read the ‘Statement by the PRA on banks, building society and credit unions branches remaining open following updated Covid-19 guidance’ for more information.

Statement by the PRA on key financial workers who are critical to the Covid-19 response

20 March 2020

On 19 March 2020, the UK Government published guidance for schools, colleges and local authorities on maintaining educational provision. Please read the ‘Statement by the PRA on key financial workers who are critical to the Covid-19 response’ for more information.

Bank of England announces supervisory and prudential policy measures to address the challenges of Covid-19

20 March 2020

This statement follows the announcement by the Bank of England (Bank) on Wednesday 11 March 2020 setting out measures to respond to the economic shock from Covid-19 from its three policy committees (see below for more information).

On Friday 20 March the Bank and PRA announced a number of measures aimed at alleviating operational burdens on PRA-regulated firms (firms) and Bank regulated financial market infrastructures (FMIs) in the wake of the Covid-19 outbreak. These measures will provide flexibility to help firms and FMIs maintain their safety and soundness and deliver the critical functions they provide to the economy.

Bank of England measures to respond to the economic shock from Covid-19

11 March 2020

The Bank’s three policy committees announced a comprehensive and timely package of measures to help UK businesses and households bridge across the economic disruption that is likely to be associated with Covid-19.

Press Conference following the announcement of measures to respond to the economic shock from Covid-19

11 March 2020

On Wednesday 11 March Mark Carney and Andrew Bailey delivered a Press Conference.

Governor statement to Treasury Select Committee, on behalf of the FPC, MPC and PRC

3 March 2020

The Bank’s role is to help UK businesses and households manage through an economic shock that could prove large but will ultimately be temporary. The Bank will take all necessary steps to support the UK economy and financial systems, consistent with its statutory responsibilities.

For all the latest information on how the PRA and Bank are responding to the Coronavirus, please visit the dedicated webpage.

News and speeches

The ideal post-EU regulatory framework – speech by Victoria Saporta

10 March 2020

In this speech Vicky Saporta looks at how banks and other financial firms should be regulated now that the UK has left the EU.

Cross cutting publications and updates

PS8/20 ‘Financial Service Compensation Scheme – Management Expenses Levy Limit 2020/21’

27 March 2020

This PRA Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 1/20 ‘Financial Services Compensation Scheme – Management Expenses Levy Limit 2020/21’. It also contains the final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2020/21.

This PS is relevant to all PRA-authorised firms, but contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act.

CP3/20 ‘Occasional Consultation Paper – March 2020’

26 March 2020

This CP proposes minor amendments to PRA rules, Supervisory Statements (SS), National Specific Templates (NST) and associated LOG files, and the market risk sensitivities data item and associated instructions.

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

  • Chapters 2, 7 and 8 – firms to which the Capital Requirements Regulation apply;
  • Chapter 3 – non-Solvency II insurance firms;
  • Chapter 4 – all Solvency II firms, and the Society of Lloyd’s;
  • Chapter 5 – all PRA-authorised firms; and
  • Chapter 6 – PRA-supervised firms that operate in the UK but are not UK-headquartered firms.

The consultation period for this CP closes on Friday 26 June 2020.

Statement by the PRA accompanying measures announced by the Financial Policy Committee

11 March 2020

This PRA statement follows the announcement by the Bank’s Financial Policy Committee (FPC) of its decision to set the UK countercyclical capital buffer rate at 0% with immediate effect. FPC’s decision supports continued provision of financial services to the real economy, including the supply of credit.

Further information

Banking publications and updates

Future Data Collection platform

31 March 2020

Later this year the FCA and the PRA will be moving to a new data collection platform, which will replace Gabriel. To prepare for the move, from Thursday 2 April 2020 all Gabriel users will be asked to complete a mandatory one-time registration activity next time they log in to Gabriel. For more information on this please see the FCA website.

PS6/20 ‘Credit unions: Review of the capital regime’

13 March 2020

This PRA PS provides feedback to responses to CP28/19 ‘Credit Unions: Review of the capital regime’. It also contains the PRA’s final policy, as follows:

  • Amendments to the Credit Union Part of the PRA Rulebook; and
  • The updated SS2/16 ‘The prudential regulation of credit unions’

This PS is relevant to all UK credit unions.

PS5/20 ‘Regulatory capital instruments: update to Pre-Issuance Notification (PIN) requirements’

10 March 2020

This PS provides feedback to responses to CP20/19 ‘Regulatory capital instruments: update to Pre Issuance Notification (PIN) requirements’. It also contains the PRA’s final policy, as follows:

  • Amendments to the Definition of Capital Part of the PRA Rulebook;
  • An updated SS7/13 ‘Definition of capital (CRR firms)’;
  • An updated PIN form;
  • An updated Common Equity Tier 1 (CET1) compliance template; and
  • A summary table showing the PRA’s final clarification of ‘sufficiently in advance’ notification and ‘substantially the same’ terms (as defined in updated SS7/13)

This PS is relevant to PRA-authorised Capital Requirements Regulation (CRR) firms. For avoidance of doubt, these requirements apply to both the individual and UK consolidated level.

PS4/20 ‘Liquidity: The PRA’s approach to supervising liquidity and funding risks’

2 March 2020

This PRA PS provides feedback to responses to CP27/19 ‘Liquidity: The PRA’s approach to supervising liquidity and funding risks’.

This PS also contains the PRA’s final policy, the updated SS24/15 ‘The PRA’s approach to supervising liquidity and funding risks’.

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

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

PS7/20 ‘Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion’

16 March 2020

This PRA PS provides feedback to responses to CP26/19 ‘Solvency II: Adjusting for the reduction of loss absorbency where own fund instruments are taxed on conversion’. It also contains the PRA’s final policy in the updated SS3/15 ‘Solvency II: The quality of capital instruments’.

This PS 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.

Letter from David Bailey, Anna Sweeney, Charlotte Gerken, and Sarah Breeden ‘PRA rules on board diversity’

4 March 2020

On Wednesday 4 March David Bailey, Anna Sweeney, Charlotte Gerken and Sarah Breeden sent a letter to Solvency II insurers, large non-Directive firms and CRR firms on ‘PRA rules on board diversity’.

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 April 2020

Closing date: 3 April 2020

Closing date: 27 April 2020

Closing date: 30 April 2020

Also in the month

5 March 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.

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:

Stay in touch

Subscribe to our email notifications for all the latest news and publications.

Send your comments on the PRA Regulatory Digest to PRA Communications.

Was this page useful?
Add your details...