PRA Regulatory Digest - June 2021

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 July 2021

Top news and publications

  • Prudential Regulation Authority Annual Report 2021
  • The Bank of England’s climate-related financial disclosure 2021
  • PRA statement on firm authorisation under the Temporary Permissions Regime
  • CP14/21 ‘Consultations by the FPC and PRA on changes to the UK leverage ratio’

News and speeches

Solvency II Review: Protecting Policyholders while improving the regime – speech by Anna Sweeney

15 June 2021

Given at the JP Morgan European Insurance Conference, on Tuesday 15 June 2021. Anna Sweeney says that policyholder protection is at the heart of the Solvency II regime.

She talks about the work we will do with the Treasury to understand the impact of potential prudential policy changes. And she encourages the firms we regulate to take part.

She also gives an update on the PRA’s plans for stress testing firms next year.

Cross cutting publications and updates

PS14/21 ‘Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251’

30 June 2021

This Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 6/21 ‘Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251’. It also contains the PRA’s and Financial Conduct Authority’s (FCA) final policy, in the form of amendments to BTS 2016/2251.

This PS is relevant to PRA-authorised firms that are financial counterparties for the purposes of Article 2 of the European Market Infrastructure Regulation. In addition, this PS is relevant to all FCA solo-regulated entities and non-financial counterparties in scope of the margin requirements under EMIR.

CP13/21 ‘Occasional Consultation Paper – June 2021’

25 June 2021

This CP sets out the PRA proposals to make minor amendments to PRA rules, supervisory statements (SS), reporting data items and instructions, the Branch Return, and associated guidance and notes.

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

  • Chapters 2 and 3 – banks, building societies, and PRA-designated investment firms;
  • Chapter 4 – Capital Requirements Regulation (CRR) firms;
  • Chapter 5 – PRA-supervised third country branches; and
  • Chapter 6 –
    • Audit Committee – CRR firms, UK Solvency II insurance and reinsurance firms, and the Society of Lloyd’s and managing agents; and
    • Auditors – major UK banks and building societies.

This consultation closes on Wednesday 25 August 2021. 

Prudential Regulation Authority Annual Report 2021

17 June 2021

The PRA has published its annual report covering PRA activities 1 March 2020 – 28 February 2021.As part of the PRA’s commitment to streamline the publication of its reporting obligations, it also published the:

Readers may find it helpful to read the PRA Annual Report alongside the Bank of England Annual Report and Accounts, which includes the PRA’s statement of accounts for the reporting period ended 28 February 2021.

The Bank of England’s climate-related financial disclosure 2021

17 June 2021

The Bank published its climate-related financial disclosure in June 2021, which sets out the Bank’s approach to managing the risks from climate change across its entire operations.

PRA statement on firm authorisation under the Temporary Permissions Regime

14 June 2021

This statement provides an update on the PRA’s approach to firm authorisation under the Temporary Permissions Regime, relevant to European Economic Area banks and insurers within scope.

PS11/21 ‘Strengthening accountability: Temporary, long-term absences’

1 June 2021

This PS provides feedback to responses to Chapter 2 of the FCA CP20/23 ‘Quarterly Consultation Paper No. 30’. Chapter 2 of the CP jointly proposed PRA and FCA expectations regarding temporary, long-term absences for Senior Management Functions.

This PS is relevant to all PRA-authorised firms.

Further information

Banking publications and updates

CP14/21 ‘Consultations by the FPC and PRA on changes to the UK leverage ratio’ framework’

29 June 2021

The Financial Policy Committee (FPC) conducted a comprehensive review of the UK leverage ratio framework in light of revised international standards, and its ongoing commitment to review its policy approach. This document outlines the changes that the FPC proposes to make to the framework, and the PRA’s proposed approach to implementing these changes.

This consultation is relevant to all CRR firms and CRR consolidation entities on an individual, consolidated, and where relevant, sub-consolidated basis.

This consultation closes on Tuesday 24 August 2021.

CP12/21 ‘Financial holding companies: Further implementation’

21 June 2021

This CP sets out the PRA’s proposed rules in respect of the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies (holding companies) that have been approved or designated in accordance with Part 12B of the Financial Services and Markets Act 2000 (FSMA). It also proposes guidance with respect to directions and penalties over holding companies under Part 12B FSMA, covering the taking of measures, including directions; the imposition of penalties; and the amount of penalties.

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

This consultation closes on Thursday 22 July 2021. 

PS13/21 ‘Credit risk: The approach to overseas Internal Ratings Based (IRB) models’

7 June 2021

This PS provides feedback to responses to CP16/20 ‘Credit Risk: The approach to overseas Internal Ratings Based (IRB) models’. It also contains the PRA’s final policy, as follows:

  • an updated SS11/13 ‘Internal Ratings Based (IRB) approaches’ (Appendix 1); and
  • an updated pro-forma for firms to complete and submit to the PRA for overseas models moving onto the overseas models approach (Appendix 2).

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

CP10/21 ‘Implementation of Basel standards: Non-performing loan securitisations’

3 June 2021

This CP sets out the PRA’s proposed rules in respect of the implementation of prudential standards agreed by the Basel Committee on Banking Supervision for non-performing loan securitisations. It sets out how the PRA proposes to define non-performing exposure securitisations, and also proposes changes to the associated capital treatment.

The proposals in this CP would result in the addition of a new Non-Performing Exposure Securitisation Part of the PRA Rulebook (Appendix 1), and amendments to SS10/18 ‘Securitisation: General requirements and capital framework’ (Appendix 2).

The proposals in this CP are relevant to all PRA-authorised firms to which the Capital Requirements Directive applies.

This consultation closes on Monday 26 July 2021.

Letter from the PRA and FCA ‘Pre-settlement counterparty credit exposure management and controls for DvP Clients’

2 June 2021

Letter from David Bailey and Sarah Breeden of the PRA, and Edwin Schooling Latter of the FCA, to Chief Risk Officers of regulated firms, to share observation of good practices on risk controls and arrangements for Delivery versus Payment (DvP) Clients.

Insurance publications and updates

PS12/21 ‘Solvency II: Deep, liquid and transparent assessments, and GBP transition to SONIA’

3 June 2021

This PS provides feedback to responses to CP1/21 ‘Solvency II: Deep, liquid and transparent assessments, and GBP transition to SONIA’. It also contains the PRA’s final policy, as an updated Statement of Policy (SoP) ‘The PRA’s approach to the publication of Solvency II technical information’ (Appendix 1).

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-Directive firms are out of the scope of this PS. 

Deep, liquid, and transparent (DLT) assessment of the Sterling Overnight Index Average (SONIA) Overnight Index Swap (OIS) market - June 2021

3 June 2021

This report sets out the results and analysis for the PRA’s first DLT assessment of the SONIA OIS market.

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

Closing date: 7 July 2021

Closing date: 9 July 2021

Closing date: 22 July 2021

Closing date: 26 July 2021

Also in the month

25 June 2021

25 June 2021

15 June 2021

3 June 2021

1 June 2021

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:

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