PRA Regulatory Digest - March 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 April 2021

Top news and publications

  • Speech by Sam Woods – ‘Brave new world’
  • PS6/21 ‘Operational Resilience: Impact tolerances for important business services’
  • PS7/21 ‘Outsourcing and third party risk management’

News and speeches

Brave new world – speech by Sam Woods

16 March 2021

The PRA published ‘Brave new world’, a speech by Sam Woods, given at the Association of British Insurers.

Statement on Wyelands Bank

3 March 2021

The firm has the resources it needs to repay all depositors in full and the PRA has required it to operationalise an orderly repayment of its deposits.

Cross cutting publications and updates

PS7/21 ‘Outsourcing and third party risk management’

29 March 2021

This Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 30/19 ‘Outsourcing and third party risk management’. It also contains the PRA’s final Supervisory Statement (SS) 2/21 ‘Outsourcing and third party risk management’.

This PS is relevant to:

  • banks, building societies, and PRA-designated investment firms (banks);
  • insurance and reinsurance firms and groups in scope of Solvency II, including the Society of Lloyd’s and managing agents (insurers); and
  • branches of overseas banks and insurers (third-country branches).

Some of the contents of SS2/21 are relevant to credit unions and non-directive firms: the PRA rules, statutory powers, and requirements.

PS6/21 ‘Operational Resilience: Impact tolerances for important business services

29 March 2021

This paper is issued jointly by the PRA, the Financial Conduct Authority (FCA), and the Bank of England in its capacity of supervising financial market infrastructures (FMIs), collectively ‘the supervisory authorities’.

The proposals were designed to improve the operational resilience of firms and FMIs and protect the wider financial sector and UK economy from the impact of operational disruptions. The consultations proposed requirements and expectations for firms and FMIs to:

  • Identify their important business services by considering how disruption to the business services they provide can have impacts beyond their own commercial interests;
  • set a tolerance for disruption for each important business service; and
  • ensure they can continue to deliver their important business services and are able to remain within their impact tolerances during severe (or in the case of FMIs, extreme) but plausible scenarios.

PS5/21 ‘Financial Services Compensation Scheme – Management Expenses Levy Limit 2021/22’

26 March 2021

This PS provides feedback to responses to CP4/21 ‘Financial Services Compensation Scheme - Management Expenses Levy Limit 2021/22’. It also contains the final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2021/22 (see Appendix).

This PS is relevant to all PRA-authorised firms, but contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act.

PS4/21 ‘Depositor Protection: Identity verification’

24 March 2021

This PS provides feedback to responses to CP3/21 ‘Depositor protection: Identity verification’. It also contains the PRA’s final policy, as follows:

  • amendments to the Depositor Protection (DP) Part of the PRA Rulebook (Appendix 1); and
  • updates to SS18/15 ‘Depositor and dormant account protection’ (Appendix 2).

This PS is relevant to the FSCS, all PRA-authorised deposit takers, and insolvency practitioners. This PS contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act.

CP6/21 ‘Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251’

9 March 2021

This CP sets out the PRA’s and FCA’s proposals to establish or extend exemptions for some products subject to bilateral margining requirements, and to align implementation phases and thresholds to the Basel Committee on Banking Supervision and the International Organization of Securities Commissions standards.

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

This consultation closes on Wednesday 19 May 2021. 

Further information

Banking publications and updates

Version 3.4.0 Bank of England Banking PWD

31 March 2021

Firms should note that the PRA do not intend to update the Capital+ and financial statements XBRL utilities to reflect changes to the Capital+ or financial statements reporting requirements in Taxonomy 3.4.0. Firms should ensure they have their own processes in place to prepare submissions.

Please see the Banks, Building Societies and Investment Firms page for more information.

Letter from David Bailey, Sarah Breeden and the FCA: ‘Transition from LIBOR to Risk Free Rates’

26 March 2021

The PRA and FCA wrote jointly to the CEOs of PRA-regulated banks to set out our expectations for transition of risk free rate.

PS3/21 ‘PRA fees and levies: Holding company regulatory transaction fees’

17 March 2021

This PS provides the PRA’s final policy following CP21/20 ‘PRA fees and levies: Holding company regulatory transaction fees’ in the form of amendments to the Fees Part of the PRA Rulebook (Appendix).

This PS is relevant to PRA-authorised banks, PRA-designated investment firms, and their parent undertakings, which for this purpose comprise financial holding companies and mixed financial holding companies, as well as those intermediate holding companies that sit at the top of a sub-consolidation group.

Bank of England banking taxonomy V3.4.0 public working draft

10 March 2021

The PRA published v3.4.0 public working draft (PWD) of the Bank of England XBRL banking taxonomy to support the collection of Capital+, Financial Statements and Ring-fencing reporting, alongside related technical artefacts. Please see the Banks, building societies and investment firms webpage for more information.

Initiative powers

4 March 2021

As described in PS26/20 (Capital Requirements Directive V (CRD V), the PRA has exercised its own initiative powers under s55M(3) and s55Y(4) FSMA to implement the changes to (i) the Capital Buffers and Pillar 2A Model Requirement and (ii) the Additional Leverage Ratio Buffer Model Requirements, as well as, for those firms subject to it, to replace references to the Systemic Risk Buffer with references to the O-SII Buffer. All firms have received Own Initiative Requirement notices from December 2020 to that effect. The text of the current Capital Buffers and Pillar 2A Model Voluntary Requirement (VREQ)  and Additional Leverage Ratio Buffer Model Requirements is available on the Bank of England website.

Further information

Insurance publications and updates

PS2/21 ‘Solvency II: The PRA’s expectations for the work of external auditors on the matching adjustment’

18 March 2021

This PRA PS provides feedback to responses to CP11/20 ‘Solvency II: The PRA’s expectations for the work of external auditors on the matching adjustment’. It also contains the PRA’s final policy in the form of an updated SS11/16 ‘Solvency II: External audit of, and responsibilities of the governing body in relation to, the public disclosure requirement’ (Appendix).

This PS is relevant to UK Solvency II firms (including mutuals) that have approval to make use of the matching adjustment (MA). It is especially relevant to those firms that are subject to an audit requirement in respect of their Solvency and Financial Condition Report (SFCR). This PS is also relevant for the auditors of such organisations and the users of these SFCRs.

Further information

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

Closing date: 11 April

Also in the month

26 March 2021

26 March 2021

25 March 2021

8 March 2021

5 March 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. In February Bank Overground published ‘How has Covid affected the performance of machine learning models used by UK banks?’

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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