PRA Regulatory Digest - September 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 October 2020

Top news and publications

  • Update to statement by the PRA on key financial workers who are critical to the Covid-19 response
  • CP13/20 ‘UK withdrawal from the EU: Changes before the end of the transition period’

Regulatory measures for firms in response to Covid-19

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

24 September 2020

The PRA notes the recent statement made by UK Government and Devolved Administrations on Covid-19 on Tuesday 22 September 2020. Firms should continue to follow Government advice on working from home until notified otherwise.

The financial services industry has continued to operate during the coronavirus outbreak with home working and some workers operating in locations such as branches and call centres.

The PRA have previously published advice on the steps financial firms should take: ‘Statement by the PRA on key financial workers who are critical to the Covid-19 response’. This has been updated to reflect recent developments.

News and speeches

Ask not what the economy can do for insurers – ask what insurers can do for the economy – speech by Anna Sweeney

22 September 2020

The insurance industry is central to the UK’s economy, says Anna Sweeney. And it can play an important part in our economic recovery from Covid-19.

Paving the way forward: managing climate risk in the insurance sector – speech by Anna Sweeney

9 September 2020

Anna Sweeney looks at what climate change means for the insurance industry. She examines the risks insurers face and what they can do about them.

Cross cutting publications and updates

CP13/20 ‘UK withdrawal from the EU: Changes before the end of the transition period’

22 September 2020

The UK’s membership of the European Union (EU) came to an end on Friday 31 January 2020 following the ratification by the UK and the EU of the Withdrawal Agreement. Under the terms of the Withdrawal Agreement, the UK entered into a transition period during which EU law continues to apply to the UK. The transition period is due to last until 11pm on Thursday 31 December 2020, which is defined in UK law as ‘IP completion day’.

This Consultation Paper (CP) contains:

  • Section A: an update on the Bank’s and PRA’s intended use of the temporary transitional power provided for in the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019.
  • Section B: Bank and PRA consultation with proposals to fix deficiencies arising from the UK’s withdrawal from the EU and make consequential changes before the end of the transition period. 

This CP is relevant to all firms authorised and regulated by the PRA, including those that expect to have a deemed permission under the ‘temporary permissions regime’ or Financial Services Contracts Regime, or that seek to apply for PRA authorisation in the future. It is also relevant to FMIs recognised and supervised by the Bank, including those central counterparties that expect to have a deemed recognition under the ‘temporary recognition regime’.

This consultation closes on Tuesday 17 November 2020. 

The PRA also published a report on the Bank’s and PRA’s use of sub-delegated powers under the EU (Withdrawal) Act 2018. HM Treasury laid this report in Parliament on Thursday 17 September 2020. The Bank and PRA must submit this report to Parliament annually if they exercise the relevant sub-delegated powers. This covers the financial year ending 29 February 2020.

Regulatory Initiatives Forum’s grid

18 September 2020

Jointly with the Bank of England, Financial Conduct Authority, Competition & Markets Authority, Payment Systems Regulator, Information Commissioner’s Office, Pensions Regulator, and HM Treasury (as observer member), the PRA published an updated version of the Regulatory Initiatives Forum’s grid – a consolidated plan of initiatives that the authorities consider will, or may, have significant operational impact on firms across the next 24 months.

Regulatory Initiatives Forum’s grid

PS20/20 ‘Responses to CP3/20 ‘Occasional Consultation Paper’

4 September 2020

This PRA Policy Statement (PS) provides feedback to responses to Chapters 2 to 7 of CP3/20 ‘Occasional Consultation Paper’. It also includes the final rules, updated supervisory statements (SS), forms, relevant templates, and associated LOG files and instructions.

This PS is relevant to all PRA-authorised firms, with different chapters having relevance to different types of firms. Please see the PS webpage for further details.

Letter from Sam Woods ‘Temporary Permissions Regime – operational readiness’

2 September 2020

This letter to chief executive officers of all PRA-regulated firms discusses preparing for the end of the transition period and for entering the Temporary Permissions Regime.

Banking publications and updates

CP14/20 ‘Internal Ratings Based on UK mortgage risk weights: Managing deficiencies in model risk capture’

30 September 2020

This Consultation Paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposals to introduce new expectations on Internal Ratings Based (IRB) approach UK mortgage risk weights.

The proposals in this CP would result in changes to Supervisory Statement (SS) 11/13 ‘Internal Ratings Based (IRB) approaches’.

This CP is relevant to PRA-authorised UK banks, building societies and ring-fenced banks (RFBs) holding IRB model permissions. It may be of interest to other firms, including those considering applying for IRB model permission, and other market participants.

This consultation closes on Saturday 30 January 2021.

Update (Version 02.04) to the PRA110 liquidity metric monitoring tool (PRA110 LMM tool)

24 September 2020

This update is published following feedback received on the previous version published on Thursday 5 March 2020. Version 2.04 of the PRA110 LMM tool includes the enhanced wholesale only stress. Please see the Liquidity tools – supervisory tools webpage for more information.

Update on the annual stress test

22 September 2020

The Bank has taken a range of supervisory and policy measures to address the challenges of Covid-19, including the cancellation of the annual stress test (ACS) for systemic firms and increased emphasis on buffer usability. Following the cancellation of the ACS, the PRA is not publishing the related stress scenarios for non-systemic firms.

Please see the ‘Scenarios for banks and building societies not part of concurrent stress testing’ section on the Stress testing webpage for more information.

Proprietary Trading Review

21 September 2020

This report discusses proprietary trading carried out by relevant authorised persons. It discusses the extent of this activity, the risks it poses to the safety and soundness of firms, the tools the PRA has to mitigate these risks, and the experience of other countries in restricting proprietary trading within the banking sector. It also addresses whether the ring-fencing regime, together with the other tools available to the PRA, are sufficient to mitigate the risks proprietary trading poses to financial stability and the safety and soundness of firms.

2021 Supervisory Benchmarking Portfolio exercise

14 September 2020

The PRA published guidance on data submissions for the 2021 Supervisory Benchmarking Portfolio exercise. Please see the Regulatory reporting – banking sector webpage for more information.

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

Closing date: 1 October

Closing date: 1 October

Closing date: 12 October

Closing date: 13 October

Closing date: 14 October

Closing date: 23 October

Closing date: 30 October

Also in the month

9 September 2020

4 September 2020

3 September 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 ‘Could Covid-19 lead to higher bank losses on unsecured debt’, ‘What are we doing to help individuals and businesses make faster and cheaper cross-border payments?’, and ‘Why do firms need to accelerate the transition from Libor benchmarks?’

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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