Prudential regulator issues a range of important publications

UK’s prudential regulator pushes-out material across a range of topics

 

The UK PRA has issued a number of documents during late July and August 2016 which affected firms will need to disseminate and react to as part of any ongoing compliance process.

 

In mid-July the PRA issued a policy statement (see PS22/16) with linked material on its intended supervisory approach towards certain Solvency II firms meeting future expectations as to their remuneration arrangements, as well new reporting templates for affected firms informing the PRA on their ‘Remuneration Policy Statement’ (RPS). The PRA had already earlier in July consulted further (see CP23/16) on policy plans introducing a requirement for elements of the public disclosure requirement under Solvency II to be externally audited which remains on-track to apply to firms with year-ends on or after mid-November 2016.

 

Following consultation and policy material issued in early July (see CP25/16) concerning reporting and residual matters as to the implementation of the ‘ring-fencing’ provisions, as part of the banking reform process stretching across core financial services and activities in the UK, the PRA has also issued other separate consultation material which might be of relevance to firms affected by the ring-fencing’ process. The UK’s ring-fencing process remains of most and direct significance to those ring-fenced bodies (RFB’s) and other banking groups and regulated entities who do or expect to hold deposits >£25bn (the anticipated threshold) by January 2019. However, the more recent publications have a wider relevance, including proposals over the data required to be reported to the PRA by firms concerning operational continuity in resolution (see CP28/16) with eventual final rules also expected to apply from January 2019 though actual first submissions are unlikely until early 2020. These reporting arrangements will require firms to report on the financial resources and activities of any group provider(s) so the PRA can monitor the adequacy and risks of any associated liquid assets.

 

In addition, the PRA has also further consulted (see CP27/16) on the framework and its intended regulatory approach and statement of policy (SoP) concerning the implementation of an ‘annual’ Systemic Risk Buffer (SRB). Again this is relevant to ring-fenced bodies and other firms/organisations holding >£25bn in deposits e.g. larger building societies. The material covers some of the expected analysis, judgement and decision-making that will be expected of firms by the PRA when reviewing and evidencing their SRB approach, processes and controls, once the initial SRB rates have been set and applied during 2019.

 

Finally, in mid-August a letter issued by PRA Supervision (dated 12 August 2016) has sought to remind banking and other deposit-taking firms of their responsibilities and obligations for ensuring and promoting diversity within their management bodies and those who perform senior management functions to encourage and facilitate good governance. Firms are reminded of the general organisational requirement to have policy in place to both deliver diversity and to actively address any identified gaps and shortfalls.