Resolution Planning | Living Will | 1 Aug 2019 | PRA | UK

Thursday, August 8, 2019

ChartAcc.com - Given below are the recent updates on from PRA on regulatory reporting as of July 2019:

Resolution assessment and public disclosure by firms

Applicability:
It is relevant to UK banks and building societies with retail deposits equal to or greater than £50 billion on an individual or consolidated basis, as at the date of their most recent annual accounts (‘in-scope firms’).


Commencement:
The instrument comes into effect from 1st Aug 2019 and is named as PRA Rulebook RESOLUTION ASSESSMENT INSTRUMENT 2019.


Definitions:

Deposit: It has the meaning given in 30, Part 1, Annex V (Reporting on financial information) of the European Banking Authority’s Implementing Technical Standards amending the Commission’s Implementing Regulation (EU) No 680/2014 on supervisory reporting under Regulation (EU) No 575/2013 of the European Parliament and of the Council.

Retail Deposit: It means deposits from “households” as defined in 35(f), Part 1, Annex V (Reporting on financial information) of the European Banking Authority’s Implementing Technical Standards amending the Commission’s Implementing Regulation (EU) No 680/2014 on supervisory rep

Assessment:
A firm must carry out an adequate assessment of its preparations for resolution which should:
1.       be realistic;
2.       include analysis of how the firm understands it would be resolved, any risks to its resolution and steps the firm is taking or plans to take to remove or reduce those risks; and
3.       be reviewed by the firm if there is reason to suspect it is no longer accurate and updated if there has been a change in any of the matters to which it relates that impacts its assessment.


Report required:
A firm must submit to the PRA a report in writing of the assessment in 2.1 by:
1.       the first Friday in October 2020; and
2.       biennially thereafter, by the first Friday in October of the relevant calendar year. PRA2019/14 Page 4 of 4 3.2 A firm must submit to the PRA an updated version of the report within 20 working days.

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PRA | EU | Pillar 2 Capital Buffer | Credit amigration

Tuesday, March 19, 2019

ChartAcc.com - The below are the recent updates from PRA on regulatory reporting:


1. Pillar 2 capital
(Feedback on CP closes on Thursday 13 June 2019; To be implemented  from  Tuesday 1 October 2019)
Update to the framework – Calculation of PRA buffer to reflect continued refinements and developments in setting the PRA buffer (also referred to as Pillar 2B).
The purpose of these proposals is to:
a.       bring greater clarity, consistency and transparency to the PRA’s capital setting approach;
b.      to promote financial stability, the safety and soundness of PRA-authorised firms; and
c.       facilitate more informed and effective capital planning for banks.

2. ICAAP and SREP
(applicable from Friday 13 September 2019)
The updates on the Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP).
Following consideration of responses, the PRA has made three significant changes to the proposals consulted on in the CP. These changes are as follows:
a.       the removal of the proposal relating to the meaning of pay out in a timely manner;
b.      a new expectation around risks arising from eligible guarantee arrangements; and
c.       a new expectation around recognising any residual risks.

3. Credit risk mitigation
(comes into effect from Friday 13 September 2019)
a.       It is used in  the calculation of certain risk-weighted exposure amounts.
b.      This supervisory statement covers elements of the following topics:
                                                               i.      eligibility of financial institutions as protection providers;
                                                             ii.      recognised exchanges;
                                                            iii.      conditions for applying a 0% volatility adjustment under the Financial Collateral Comprehensive Method (FCCM);
                                                           iv.      permission to use 'own estimates of volatility adjustments' under the FCCM; and
                                                             v.      netting of liabilities that may be subject to bail-in.

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Letter from PRA on IFRS 9 ECL to Systemically Important banks

Friday, January 18, 2019

ChartAcc.com - Victoria Saporta, Executive Director, Prudential Policy, Prudential Regulation Authority, recently sent a letter to major banks for disclosures on Expected Credit Loss under IFRS 9.


The letter was addressed on two concerns as follows:
  • Measurement uncertainty and sensitivity:
    • To enable and produce the quantitative information about that sensitivity internally
    • To report quantitative measurement uncertainty and sensitivity information from their 2018 (or 2018/2019) annual reports and accounts
  • The use of Monte Carlo approaches:
    • Firms' concern was the difficult of using above mentioned approach
    • PRA concluded that few other firms are using so all are expected to provide comprehensive and appropriately focused way and at an appropriate level of granularity.
The 7 banks were addressed this letter which are as follows:

  • Barclays plc, 
  • HSBC Holdings plc, 
  • Lloyds Banking Group plc, 
  • Nationwide Building Society,
  • Santander UK plc, 
  • Standard Chartered PLC and 
  • The Royal Bank of Scotland Group plc.

Courtsey: PRA

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LIBOR to SONIA Transition | What, Why, How, When | PRA UK updates

Thursday, January 17, 2019

ChartAcc.com - LIBOR will be replaced by SONIA. Here is a quick walk of basics and latest updates:

LIBOR (London Inter-bank Offered Rate) will soon be replaced by new rate called SONIA (Sterling Overnight Index Average).

What is LIBOR?
Banks in London estimate their respective interest rate at which they would lend to other banks. LIBOR is an average of these rates. 

Why it is being replaced?
LIBOR is prone to manipulations by the submitters. In 2012, traders and rate-setters manipulated the submitted rates that reaped huge profits to the trading position.

How SONIA will help?
SONIA is not calculated by average rates of submitter but through an index that tracks the rates of actual overnight funding deals on the unsecured wholesale money markets. This is risk free as compared to LIBOR.

When will this shift happen?
Regulators planned to switch from LIBOR to SONIA completely by 2021 post which LIBOR won't be guaranteed by FCA. 

As of now, SONIA for the previous London business day is published by authorised distributors at 9am.



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RAF By PRA For Resolution And Recovery Planning | RRP | Banking regulatory update

Tuesday, January 15, 2019

ChartAcc.com - RAF is Resolvability Assessment Framework. This is a recent development of PRA on regulation for resolution of a bank in UK . The need of this framework is to ensure followings:

  • Transparency in resolution
  • Disclosures required
  • Helping the bank to fail in orderly way
  • Resolution time lines and barriers


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