Published on 19 February 2016
The PRA’s approach to identifying other systemically important institutions (O-SIIs) – PS6/16
Overview
This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to Consultation Paper (CP) 39/15, ’The PRA’s approach to identifying other systemically important institutions (O-SIIs)’.The PS also contains a statement of policy on the PRA’s approach to identifying O-SIIs and the PRA’s 2015 list of UK firms designated as O-SIIs.
In CP39/15 the PRA set out the criteria and scoring methodology it proposed to use to identify O-SIIs. These criteria and methodology are derived from Article 131(3) of the Capital Requirements Directive (2013/36/EU) (CRD IV) – which requires O-SIIs to be identified - and follow the European Banking Authority (EBA) Guidelines on the criteria to determine the conditions of application of Article 131(3) CRD IV in relation to the assessment of O-SIIs.
The consultation set out the PRA’s proposed approach to identifying and designating as O-SIIs those firms whose distress or failure would have a systemic impact on the UK or the EU economy or financial system due to size, importance (including substitutability or financial system infrastructure), complexity, cross-border activity, and interconnectedness.
This policy statement is relevant to all credit institutions, investment firms, EEA parent institutions, EEA parent financial holding companies and EEA parent mixed financial holding companies within the domestic financial sector at their highest level of consolidation in the United Kingdom. The content of this policy statement does not apply to EEA and third-country branches operating in the UK.
Appendices
2015 list of UK firms designated as other systemically important institutions (O-SIIs)
Published on 19 October 2015
The PRA’s approach to identifying other systemically important institutions (O-SIIs) – CP39/15
Update 24 November 2015: Page 8 of this CP has been updated to replace the term ‘mixed financial holding companies’ with ‘(mixed) financial holding companies’ to align with the text elsewhere in the document.
Background
In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out the criteria and scoring methodology it proposes to use to identify other systemically important institutions (O-SIIs). These criteria and methodology are derived from Article 131(3) of the Capital Requirements Directive (2013/36/EU) (CRD) – which requires O-SIIs to be identified- and follow the European Banking Authority (EBA) Guidelines 2014/10 on the criteria to determine the conditions of application of Article 131(3) CRD in relation to the assessment of O-SIIs.
The proposals in this CP are intended to identify and designate as O-SIIs those firms whose distress or failure would have a systemic impact on the UK or the EU economy or financial system due to size, importance (including substitutability or financial system infrastructure), complexity, cross-border activity, and interconnectedness.
This consultation is relevant to credit institutions, investment firms and EEA parent (mixed) financial holding companies incorporated in the United Kingdom. The proposals contained in this consultation do not apply to EEA and third-country branches operating in the United Kingdom.
Summary of proposals
The PRA is consulting on a draft statement of policy on the PRA’s approach to identifying O-SIIs - see Appendix 1 of the CP. The statement sets out the criteria and scoring methodology that the PRA will use to identify O-SIIs under the CRD. In particular, it consults on the following areas:
(i) which firms can be identified as O-SIIs;
(ii) application of discretion afforded within the EBA’s mandatory scoring methodology for O-SII identification;
(iii) application of a supervisory overlay to adequately capture systemic risk in the UK banking sector, and proposals to use the methodology of the PRA’s existing ‘potential impact’ framework to inform this assessment; and
(iv) the timetable for O-SII identification, and publications related to O-SII identification.
Responses
This consultation closed on 18 January 2016.