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PRA Regulatory Digest - April 2021

News and speeches ‘Developments in the PRA’s supervision of annuity providers’ speech by Charlotte Gerken

29 April 2021

Charlotte Gerken talks about the supervision of annuity firms in the UK. This work is done by our PRA.

She examines the matching adjustment (MA). In particular, the calibration of the fundamental spread and the application process for MA.

She says annuity firms will continue to get significant supervisory challenge from the PRA. ‘Building strong and simple: the first step’ speech by Victoria Saporta

29 April 2021

The UK is able to take a new approach to regulating banking and insurance services post-Brexit.

Vicky Saporta sets out a new prudential regime that is robust enough to safeguard the stability of the UK’s financial system. She describes the PRA’s approach to international markets as open, yet safe.

Then she talks about the PRA’s ‘strong and simple’ prudential framework for small, non-systemic banks and building societies that are trying to grow.

Have your say: The PRA are asking for your views about how to strike the right balance between taking a streamlined or a focused approach to our prudential regulation. Read the ‘A strong and simple prudential framework for non-systemic banks and building societies’ Discussion Paper (DP), under banking publications and updates section, for more information. Bank of England statement on the regulatory treatment of the UK Recovery Loan Scheme

6 April 2021

On Tuesday 6 April, the Government launched a Recovery Loan Scheme as part of its continued Covid-19 support for UK businesses, as previously announced by HM Treasury on Wednesday 3 March 2021.

Cross cutting publications and updates Joint PRA and FCA Statement on the FSB Peer Review on remuneration

14 April 2021

On Wednesday 14 April, the Financial Stability Board (FSB) published its report on the Peer Review of the United Kingdom. The UK is the first FSB member jurisdiction to undergo a peer assessment of the effectiveness of remuneration reforms in the financial sector. CP8/21 ‘Regulated fees and levies: Rates proposals 2021/22’

8 April 2021

This Consultation Paper (CP) sets out proposals for the PRA’s fees for 2021/22. The proposals would make amendments to the Fees Part of the PRA Rulebook (Appendix).

This CP is relevant to all firms that currently pay PRA fees or are expecting to do so within the 2021/22 fee year. Letter from HM Treasury making recommendations to the Prudential Regulation Committee

1 April 2021

The Chancellor of the Exchequer wrote to Andrew Bailey, providing recommendations to the Prudential Regulation Committee (PRC) in a letter dated Tuesday 23 March 2021.

The letter was sent pursuant the Bank of England Act 1998, which specifies that the Treasury must, at least once in each Parliament, make recommendations to the PRC about aspects of the Government’s economic policy to which the PRC should have regard. This latest letter now includes a recommendation to PRC on the government’s commitment to achieve a net- zero economy by 2050 under the Climate Change Act. Further information Banking publications and updates DP1/21 ‘A strong and simple prudential framework for non-systemic banks and building societies’

29 April 2021

This DP explores options for developing a simpler prudential framework for banks and building societies that are considered by the PRA to be neither systemically important nor internationally active.

Since this would be a major change in prudential policy applying to banks and building societies in the UK, the PRA is seeking input first through this DP.

This DP closes on Friday 9 July 2021. PRA statement on the disclosure of exposures subject to measures applied in response to Covid-19

27 April 2021

This statement updates guidance to UK banks and building societies on the disclosure of exposures subject to Covid-19 measures, further to the statement of Tuesday 28 July 2020. CP9/21 ‘Remuneration: Correction to the definition of ‘higher paid material risk taker’’

26 April 2021

This CP sets out the PRA proposal to correct an error in the definition of ‘higher paid material risk taker’ in the PRA Rulebook. The purpose of this proposal is to align the ‘higher paid material risk taker’ definition with the PRA’s intention of continuing the approach outlined in Supervisory Statement (SS) 2/17 ‘Remuneration’. This CP follows the PRA statement published on Thursday 25 February 2021, which explained the PRA’s position in relation to the definition of ‘higher paid material risk taker’.

The proposals in this CP would result in changes to Remuneration Part of the PRA Rulebook and SS2/17.

This CP is relevant to PRA-authorised banks, building societies, and PRA-designated investment firms. This CP is not relevant to credit unions or PRA-authorised insurers

This consultation closes on Wednesday 26 May 2021. PRA statement on Remuneration Benchmarking and Remuneration High Earners reporting templates

22 April 2021

This statement advises firms on the PRA’s approach to the Remuneration Benchmarking and Remuneration High Earners reporting templates, as part of the EBA’s Taxonomy 2. 10. PRA statement on the regulatory treatment of retail mortgage loans under the Mortgage Guarantee Scheme

19 April 2021

This statement provides information on capital, notification, disclosure, and reporting requirements for loans under the Mortgage Guarantee Scheme (MGS) as set out in the relevant UK legislation. PS8/21 ‘Non-systemic UK banks: The Prudential Regulation Authority’s approach to new and growing banks’

15 April 2021

This PRA Policy Statement (PS) provides feedback to responses to CP9/20 ‘Non-systemic UK banks: The PRA’s approach to new and growing banks’. It also contains the PRA’s final policy, as follows:

a final SS3/21 ‘Non-systemic UK banks: The PRA’s approach to new and growing banks’ (Appendix 1);

an updated SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’, containing a reference to SS3/21 in paragraph 5. 25 (Appendix 2); and

an updated Statement of Policy (SoP) ‘The PRA’s methodologies for setting Pillar 2 capital’, containing a reference to SS3/21 in paragraph 9. 45 (Appendix 3).

This PS is relevant to the following types of banks: 

banks in their first few years of being authorised by the PRA as a deposit taker (typically less than five years post- authorisation); and 

prospective banks interested in and currently applying for authorisation as a deposit taker (UK applicant banks).

Letter from the PRA and FCA ‘Obtaining deposits via deposit aggregators’

14 April 2021

Letter from the PRA and FCA to chief executive officers regarding the use of deposit aggregators, and how to mitigate some of the key risks. CP7/21 ‘Credit risk: The identification of the nature, severity, and duration of an economic downturn for the purposes of Internal Ratings Based (IRB) models’

7 April 2021

This CP sets out the PRA’s proposed approach to implementing new requirements relating to the specification of the nature, severity, and duration of an economic downturn in the Internal Ratings Based (IRB) approach to credit risk.

The proposals in this CP would result in new UK Technical Standards (Appendix 1) and amended expectations in SS11/13 ‘Internal Ratings Based (IRB) approaches’ (Appendix 2)'.

The PRA is also proposing to make additional minor changes to SS11/13 to reflect the UK’s exit from the EU, which are set out in Chapter 3 of this CP.

The proposals are relevant to UK banks, building societies, and PRA-designated UK investment firms. Further information Insurance publications and updates Solvency II: Supervisory disclosures, PRA’s supervisory approach and insurance regulations applicable in the UK year-end 2019

20 April 2021

The PRA published supervisory disclosures in line with our obligations under Article 31(2) of the Solvency II Directive for year-end 2019. This public disclosure is designed to foster a uniform level of transparency and accountability between supervisory authorities. The material published will be of primary interest to PRA-authorised insurance companies. Further information More information

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