PRA Regulatory Digest - October 2022

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 2022

Top news and publications

  • PRA statement on credit risk mitigation (CRM) eligibility, risk-based capital treatment, and leverage ratio treatment of guarantees under the Energy Markets Financing Scheme (EMFS).
  • Results of the firm feedback survey 2021.
  • Scenario for banks and building societies not part of concurrent stress testing.

News and speeches

Growth and competitiveness − speech by Sam Woods

27 October 2022

Growth and competitiveness − speech by Sam Woods

Regulatory treatment of retail residential mortgages provided under private mortgage insurance schemes with similar contractual features to MGS

26 October 2022

Regulatory treatment of retail residential mortgages provided under private mortgage insurance schemes with similar contractual features to MGS

Scenario for banks and building societies not part of concurrent stress testing

14 October 2022

Stress testing

Results of the firm feedback survey 2021

11 October 2022

Results of the firm feedback survey 2021

Cross cutting publications and updates

Letter from Sam Woods ‘Thematic feedback on the PRA’s supervision of climate-related financial risk and the Bank of England’s Climate Biennial Exploratory Scenario exercise’

21 October 2022

Letter to CEOs of PRA-regulated firms, which provides a summary of capabilities, which PRA-regulated firms are expected to be able to demonstrate now, on approaches to managing climate risks.

Letter from Sam Woods

DP5/22 - Artificial Intelligence and Machine Learning

11 October 2022

This DP seeks to explore whether stakeholders consider the existing sectoral legal requirements and guidance to be sufficient to address the risks and harms associated with AI, where there may be gaps in existing legal requirements and guidance, and/or how any additional intervention may support the safe and responsible adoption of AI in UK financial markets.

DP5/22 - Artificial Intelligence and Machine Learning

Banking publications and updates

PRA Liquidity and Funding Reporting Q&As

24 October 2022

The PRA has created a centralised process for liquidity and funding reporting queries. The PRA is working to develop and further expand the scope of the reporting Q&As to other areas of reporting.

Banks, building societies and investment firms

PRA statement on credit risk mitigation (CRM) eligibility, risk-based capital treatment, and leverage ratio treatment of guarantees under the Energy Markets Financing Scheme (EMFS)

18 October 2022

On Monday 17 October, HM Treasury and the Bank of England (‘the Bank’) launched the Energy Markets Financing Scheme (EMFS) to address the extraordinary liquidity requirements faced by energy companies operating in UK wholesale physical gas and/or electricity markets. This statement sets out the PRA’s observations on the capital requirements relating to firms’ exposures under the scheme, particularly eligibility for recognition as unfunded credit risk mitigation (CRM) under the UK Capital Requirements Regulation (CRR). The statement also sets out observations on the treatment of exposures under the UK leverage ratio framework.

PRA statement on CRM eligibility, risk-based capital treatment, and leverage ratio treatment of guarantees under the EMFS

Letters to credit unions ‘PRA annual assessment of the credit union sector’ – 2022

14 October 2022

Letters to directors of credit unions regulated by the PRA, providing feedback from the PRA’s annual assessment of credit unions.

Letters to credit unions ‘PRA annual assessment of the credit union sector’ - 2022

CP12/22 – Risks from contingent leverage

12 October 2022

This CP sets out the PRA’s proposals to update the PRA’s supervisory expectations for firms undertaking an Internal Capital Adequacy Assessment Process (ICAAP) in relation to the risks from contingent leverage, and to introduce a new data reporting requirement for collecting data on trading exposures where these risks may most likely arise. The proposals build on work done by the PRA, and the Bank of England more generally, in recent years to explore these risks.

CP12/22 – Risks from contingent leverage

Letter from Victoria Saporta ‘Thematic feedback from the 2021/2022 round of written auditor reporting’

11 October 2022

Letter to chief financial officers of selected PRA-regulated deposit-takers which provides thematic feedback from the PRA’s review of written auditor reports received in 2022.

Letter from Victoria Saporta ‘Thematic feedback from the 2021/2022 round of written auditor reporting’

Insurance publications and updates

Solvency II Regulatory Reporting Industry Engagement Group

31 October 2022

We set up a Solvency II Regulatory Reporting Industry Engagement Group as a forum for industry representatives and members of trade bodies to discuss technical and practical issues with us.

The Industry Engagement Group met nine times between November 2021 and March 2022 to discuss various matters including specific templates and implementation dates. Further meetings will be held if required.

Regulatory reporting - insurance sector

Letter from Nylesh Shah ‘Insights from PRA thematic review on general insurance reserving and capital modelling’

20 October 2022

Letter to Chief Actuaries of general insurance firms and Lloyd’s Managing Agents regulated by the PRA on the insights from the recent thematic review across the general insurance sector.

Letter from Nylesh Shah ‘Insights from PRA thematic review on general insurance reserving and capital modelling’

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-size post summarises a pieces of analysis that support a policy or operational decision.

Explainers – 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 referred to the following websites: