PRA Regulatory Digest - October 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 02 November 2020

Top news and publications

  • Letter from the PRA and FCA ‘Final preparations for the end of the transition period’.
  • Joint with the Bank of England, the PRA are consulting on a package of proposals relating to resolution policy. The PRA published the following Consultation Papers (CPs):
    • CP18/20 ‘Bank Recovery and Resolution Directive II’
    • CP19/20 ‘Resolution assessments: Amendments to reporting and disclosures dates’
    • CP20/20 ‘Operational continuity in resolution: Updates to the policy’

Regulatory measures for firms in response to Covid

Letter from Credit Union Supervision Team to Directors of PRA-regulated credit unions

7 October 2020

The PRA sent a letter to all PRA-regulated credit unions notify them of its decision to publish a model direction modifying a PRA rule on minimum provisioning requirements, which is available on the Waivers and modifications of rules page.

News and speeches

FCA and PRA fine Goldman Sachs International £96.6 million for risk management failures in connection with 1MDB

22 October 2020

The Financial Conduct Authority (FCA) and the PRA have fined Goldman Sachs International a total of £96.6 million (US$126 million) for risk management failures connected to 1Malaysia Development Berhad (1MDB), and its role in three fund raising transactions for 1MDB.

Resilience in a time of uncertainty – speech by Nick Strange

6 October 2020

Nick Strange talks at the OpRisk Europe conference, on the policies we use to support the operational resilience of financial firms and financial market infrastructures in the UK.

Cross cutting publications and updates

Letter from the PRA and FCA ‘Final preparations for the end of the transition period’

9 October 2020

The PRA published a letter to all PRA-regulated firms ‘Letter from the PRA and FCA ‘Final preparations for the end of the transition period’ to help ensure that firms, and their clients, are ready for a range of scenarios at the end of the transition period.

Letter from Victoria Saporta ‘Thematic feedback from the 2019/2020 round of written auditor reporting’

2 October 2020

The PRA published a letter to chief financial officers which provides thematic feedback from the PRA’s review of written auditor reports received in 2020.

Further information

Banking publications and updates

CP20/20 ‘Operational continuity in resolution: Updates to the policy’

28 October 2020

In this Consultation Paper (CP), the PRA sets out its proposals to revise its operational continuity in resolution (OCIR) policy. The purpose of the proposals is to improve firms’ resolvability and support the Bank of England’s approach to resolution as set out in the Statement of Policy (SoP) ‘The Bank of England’s approach to assessing resolvability’. The proposals would make amendments to the Operational Continuity Part of the PRA Rulebook, PRA OCIR expectations, and would result in a new Supervisory Statement (SS) on OCIR. The new SS would supersede SS9/16 ‘Ensuring operational continuity in resolution’.

This CP is relevant to PRA-authorised UK banks, building societies, and PRA-designated UK investment firms currently in scope of, or likely to come into scope of, the Rules. For a firm to be in scope of the Rules, it must receive critical services, and must meet one of the three thresholds set out in Operational Continuity 1.1.This consultation closes on Sunday 31 January 2021.

CP19/20 ‘Resolution assessments: Amendments to reporting and disclosure dates’

28 October 2020

This CP sets out the PRA proposal to extend, by one year, the dates by which firms are first required to submit a report of their assessment of their preparation for resolution, and to first publish a summary of that report under Rule 3.1(1) and Rule 4.1(1) respectively of the Resolution Assessment Part of the PRA Rulebook.

The PRA also proposes consequential amendments to SS4/19 ‘Resolution assessment and publication disclosure by firms’.

This CP is relevant to UK banks and building societies with £50 billion or more in retail deposits on an individual or consolidated basis, as at the date of their most recent annual accounts.

This consultation closes on Sunday 31 January 2021.

CP18/20 ‘Bank Recovery and Resolution Directive II’

28 October 2020

In this CP, the PRA sets out proposals relating to its Contractual Recognition of Bail-in (CROB) and Stay in Resolution (Stays) Rules. The purpose of the proposals is to support the UK’s transposition of the Bank Recovery and Resolution Directive II (BRRD II), which amends the BRRD. The UK is required to transpose the BRRD II amendments by Monday 28 December 2020.

This CP is relevant to BRRD undertakings to which the CROB and Stays Parts apply.

This consultation closes on Monday 30 November 2020.

CP17/20 ‘Capital Requirements Directive V (CRD V): Further implementation’

20 October 2020

This CP sets out proposed changes to the PRA’s rules, SS, and SoPs to implement elements of the Capital Requirements Directive V (CRD V). It also proposes to update aspects of the UK framework as a result of amendments to the Capital Requirements Regulation (CRR, as amended in CRR II), which apply during the EU Exit Transition Period.

This CP is relevant to banks, building societies, PRA-designated investment firms, UK financial holding companies, and UK mixed financial holding companies of certain PRA-authorised firms.

This CP should be read in conjunction with CP12/20 ‘Capital Requirements Directive (CRD) V’.

This consultation closes on Tuesday 17 November 2020.

The PRA hosts IRB mortgage roundtable

14 October 2020

The PRA hosted a virtual roundtable meeting on internal ratings based (IRB) mortgages, for PRA-regulated firms with an IRB permission for mortgage exposures, on Monday 5 October 2020.

PS22/20 ‘Counterparty credit risk: Treatment of model limitations in banks’ internal models’

14 October 2020

This Policy Statement (PS) provides feedback to responses to CP17/19 ‘Counterparty credit risk: Treatment of model limitations in banks’ internal models’. It also contains final policy in the form of the updated SS12/13 ‘Counterparty credit risk’.

This PS is relevant to UK banks, building societies and PRA-designated UK investment firms that are subject to the CRR (575/2013). It is not relevant to UK branches of firms in other European Economic Area (EEA) countries and non-EEA countries, nor to insurance firms.

Letter from Sam Woods ‘Information request: Operational readiness for a zero or negative Bank Rate’

12 October 2020

Letter to chief executive officers to request information about firms’ operational readiness to implement a zero or negative Bank Rate.

This letter has been sent to specific firms to help the Bank and PRA to understand the operational implications of implementing a negative or zero policy rate, and is not indicative that the Monetary Policy Committee will employ a zero or negative policy rate.

CP16/20 ‘Credit risk: The approach to overseas Internal Ratings Based (IRB) models’

12 October 2020

This CP sets out the PRA’s proposed approach in respect of firms’ use of overseas IRB credit risk models built to non-UK regulatory requirements, in the calculation of UK group consolidated capital requirements.

The proposals in this CP would result in changes to SS11/13 ‘Internal Ratings Based (IRB) approaches’ to include the PRA’s approach to overseas IRB models.

The proposals are relevant to UK banks, building societies and PRA-designated UK investment firms.

This consultation closes on Tuesday 12 January 2021.

CP15/20 ‘Market risk: Calculation of risks not in value at risk, and stressed value at risk’

6 October 2020

This CP sets out the PRA’s proposals to update its expectations regarding (i) the measurement of risks not in value at risk (RNIV); and (ii) the meaning of ‘period of significant financial stress relevant to the institution’s portfolio’ for stressed value at risk (sVaR) calculation. The proposals would make amendments to SS13/13 ‘Market risk’.

The CP is relevant to all firms to which CRD IV applies.

This consultation closes on Friday 6 November 2020.

Further information

Insurance publications and updates

Letter from the PRA and FCA to insurance firms ‘Final preparations for the end of the transition period’

21 October 2020

The PRA published a letter to all PRA-regulated insurance firms ‘Letter from the PRA and FCA ‘Final preparations for the end of the transition period’ to ask firms to continue to build on preparations for a range of scenarios at the end of the transition period.

PS21/20 ‘Extending policyholder protection for building guarantee policies’

9 October 2020

This PS contains a rule change to increase protection for eligible policyholders of building guarantee policies. It makes amendments to the Policyholder Protection Part of the PRA Rulebook. 

This PS is relevant to: 

  • the Financial Services Compensation Scheme as the scheme administrator of the policyholder protection rules; 
  • UK insurers (including those that establish a branch or operate on a freedom of services basis in the EEA, EEA insurers that establish a UK branch or operate in the United Kingdom on a freedom of services basis, and Channel Islands insurers and Isle of Man insurers with UK, Channel Island or Isle of Man risk or commitments);
  • firms that have assumed responsibility for liabilities from PRA-authorised insurers (successors); and 
  • policyholders.

Further information

Your input and views on open PRA consultations and other requests closing in November 2020

Closing date: 6 November

Closing date: 17 November

Closing date: 17 November

Closing date: 30 November

Also in the month

26 October 2020

26 October 2020

13 October 2020

12 October 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. Last month Bank Overground published ‘How has Covid-19 affected small UK companies?’ and ‘How persistent will the impact of Covid-19 on unemployment be?

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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