21 July 2021 update: The PRA published ‘PS18/21 ‘Remuneration: Correction to the definition of ‘higher paid material risk taker’ to align the ‘higher paid material risk taker’ definition in the PRA Rulebook with the PRA’s intentions. All changes outlined in this PS will take effect from Friday 23 July 2021, however firms would not be required to apply the corrected definition to remuneration that has been paid, vested, or is subject to an obligation to pay or vest created before this date.
Published on 28 December 2020
Capital Requirements Directive V (CRD V) – PS29/20
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides the final policy to Consultation Paper (CP) 22/20 ‘Designation of firms within certain consolidation groups’. It also contains final PRA Rulebook instruments, Statements of Policy (SoP), Supervisory Statements (SS), and templates as published in near-final form in PS26/20 ‘Capital Requirements Directive V (CRD V)’, set out in the appendices to this PS.
This PS is relevant to UK banks, building societies, and PRA-designated investment firms, as well as UK financial holding companies, and UK mixed financial holding companies.
Summary of responses
The PRA received no responses to CP22/20. The PRA will therefore publish the policy as proposed.
Feedback received to CP12/20 and CP17/20 (page 3 of 3), and the PRA’s response, is outlined in PS26/20 (page 2 of 3).
Implementation
This PS confirms that the policy published in PS26/20 as near-final has now been finalised and applies as set out in the appendices to this PS.
The rules proposed in CP22/20 apply to the period between Monday 28 December 2020 and the date on which the UK parent financial (or mixed financial) holding company’s application for approval or exemption is finally determined by the PRA.
Further information on implementation can be found in PS29/20 and PS26/20.
Policy Statement 29/20Appendices
- Appendix 1: PRA RULEBOOK: CRR FIRMS: GLOSSARY (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 2: PRA RULEBOOK: CRR FIRMS: CAPITAL BUFFERS (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 3: PRA RULEBOOK: CRR FIRMS: CAPITAL BUFFERS (CAPITAL REQUIREMENTS DIRECTIVE V) No2 INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 4: PRA RULEBOOK: CRR FIRMS: ARRANGEMENTS, PROCESSES AND MECHANISMS (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 5: PRA RULEBOOK: CRR FIRMS: CREDIT RISK INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 6: PRA RULEBOOK: CRR FIRMS: GROUPS (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 7: PRA RULEBOOK: CRR FIRMS: GROUPS (CAPITAL REQUIREMENTS DIRECTIVE V) (No 2) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 8: PRA RULEBOOK: CRR FIRMS: INTEREST RATE RISK ARISING FROM NON TRADING ACTIVITIES INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 9: PRA RULEBOOK: CRR FIRMS: GENERAL ORGANISATIONAL REQUIREMENTS (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 10: PRA RULEBOOK: CRR FIRMS: REPORTING PILLAR 2 (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 11: PRA RULEBOOK: CRR FIRMS: NON CRR FIRMS: REGULATORY REPORTING – BRANCH REPORTING (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 12: PRA RULEBOOK: CRR FIRMS: RELATED PARTY TRANSACTION RISK (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 13: PRA RULEBOOK: CRR FIRMS: REMUNERATION (CAPITAL REQUIREMENTS DIRECTIVE V) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 14: PRA RULEBOOK: CRR FIRMS: DESIGNATION (CONSOLIDATION) INSTRUMENT 2020 (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 15: FSA079 ‘Pillar 2 Concentration risk additional data requirements’ data item (xltx) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 16: FSA079 ‘Pillar 2 Concentration risk additional data requirements’ instructions (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 17: Statement of Policy ‘The PRA’s methodologies for setting Pillar 2 capital’
- Appendix 18: SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’
- Appendix 19: SS2/17 ‘Remuneration’
- Appendix 20: SS28/15 ‘Strengthening accountability in banking’
- Appendix 21: SS15/13 ‘Groups’
- Appendix 22: SS34/15 ‘Guidelines for completing regulatory reports’
- Appendix 23: SS4/16 ‘Internal governance of third country branches’
- Appendix 24: SS1/17 ‘Supervising international banks: the PRA’s approach to branch supervision – liquidity reporting’
- Appendix 25: Statement of Policy ‘The PRA’s approach to the implementation of the other systemically important institutions (O-SII) buffer’
- Appendix 26: Statement of Policy ‘The PRA’s approach to identifying other systemically important institutions (O-SIIs)’
- Appendix 27: SS45/15 ‘The UK leverage ratio framework’
- Appendix 28: SS16/16 ‘The minimum requirement for own funds and eligible liabilities (MREL) – buffers and Threshold Conditions’
- Appendix 29: SS6/14 ‘Implementing CRD: Capital buffers’
- Appendix 30: SS20/15 ‘Supervising building societies’ treasury and lending activities’
- Appendix 31: SS32/15 ‘Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, and PRA111’
- Appendix 32: Capital Buffers and Pillar 2A Model Requirements
- Appendix 33: Additional Leverage Ratio Buffer Model Requirements
Published on 09 December 2020
Capital Requirements Directive V (CRD V) – PS26/20
Overview
This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 12/20 ‘Capital Requirements Directive V (CRD V)’ and CP17/20 ‘Capital Requirements Directive V (CRD V): Further implementation’. It also contains near-final Rules instruments, Statements of Policy (SoP), Supervisory Statements (SS), and templates.
The appendices to the PS (see below) provide links to the near-final policy material.
This PS is relevant to UK banks, building societies, and PRA-designated investment firms, and UK financial holding companies and UK mixed financial holding companies of certain PRA-authorised firms.
Summary of responses
The PRA received twelve responses to CP12/20. Respondents generally welcomed the PRA’s proposals. However, respondents also sought additional clarification in certain areas, raised concerns that some elements could be difficult to operationalise, and opposed certain proposals. Most responses focused in particular on the PRA’s proposals on remuneration.
The PRA received four responses to CP17/20. Respondents in general were supportive in several areas, but asked for clarifications in some areas, provided comment on proposals that they suggested were difficult to operationalise, and opposed some of the proposals. The majority of the responses focused on the IRRBB proposals, but there were also comments on other aspects.
Implementation
The policy material is published as near-final. The PRA does not intend to change policy or make significant alterations to the text of the instruments before the publication of the final policy material. The policy material has been approved for publication as near-final versions by the relevant PRA governance committees, but the instruments have not been formally made at this stage. The instruments are being published now to maximise the time that firms have to review them before the final rules apply. The PRA is not able to publish final instruments at the time of publishing this PS, because the power for the PRA to make rules imposing consolidated or sub-consolidated requirements on holding companies cannot be exercised by the PRA before Monday 28 December 2020.
The final Rule instruments will be published in a subsequent PS in time for the implementation deadline of Monday 28 December 2020, once the powers referred to above have come into effect.
The policy set out in this PS has been designed in the context of the UK’s withdrawal from the European Union and the current transition period, during which time the UK remains subject to European law. The PRA also assessed whether any changes would be required owing to changes in the UK regulatory framework at the end of the transition period when EU law no longer applies in the UK. The near-final post transition period rules and supervisory statements reflect that consideration.
Please see the PS for further detail on implementation.
Appendices
As there are many appendices, please see PS26/20 (page 49) for links to each relevant document. Please note that all of the appendices are near-final. The final versions will be published on Monday 28 December 2020.
Capital Requirements Directive V (CRD V): Further implementation - CP17/20
Overview
This Consultation Paper (CP) sets out proposed changes to the Prudential Regulation Authority’s (PRA) rules, supervisory statements (SS) and statements of policy (SoP) to implement elements of the Capital Requirements Directive V (CRD V). It also proposes to update aspects of the UK framework as a result of amendments to the Capital Requirements Regulation (CRR, as amended in CRR II), which apply during the EU Exit Transition Period. This CP is relevant to banks, building societies, PRA-designated investment firms, UK financial holding companies, and UK mixed financial holding companies of certain PRA-authorised firms.
This CP should be read in conjunction with CP12/20 ‘Capital Requirements Directive (CRD) V’, which sets out the PRA’s proposed approach to implementing other elements of CRD V, and HM Treasury’s (HMT) approach to implementing aspects of CRD V and CRR II that require legislative changes in order to implement them in the UK. HMT’s approach is being legislated for through the Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020.
The CRD V measures covered by this CP include:
- a new requirement for the approval and supervision of certain holding companies;
- measures to enhance supervisory requirements to measure, monitor, and control interest rate risk in the banking book;
- measures revising the framework for applying capital buffers;
- amendments to the definition of the maximum distributable amount that constrains a firm’s distributions when it uses its capital buffers;
- clarifying the quality of capital required to meet Pillar 2 requirements.
The CRR measures covered comprise adjustments to:
- the process through which variable capital requirements may be applied to firms' real estate exposures (and the public authority responsible for applying it); and
- the methods that may be used for the purposes of prudential consolidation.
| CP chapter | Policy material | CP Appendix |
|---|---|---|
| 3. Application of prudential requirements to approved holding companies | The General Organisational Requirements Part of the PRA Rulebook | 1 |
| The Skills, Knowledge and Expertise Part of the PRA Rulebook | 1 | |
| The Risk Control Part of the PRA Rulebook | 1 | |
| The Remuneration Part of the PRA Rulebook | 1,2 | |
| The Individual Capital Adequacy Assessment (ICAA) Part of the PRA Rulebook | 1,2 | |
| The Individual Liquidity Adequacy Assessment (ILAA) Part of the PRA Rulebook | 1,2 | |
| The Group Risk Systems Part of the PRA Rulebook | 1,2 | |
| The Capital Buffers Part of the PRA Rulebook | 1, 2 | |
| 4. IRRBB | The ICAA Part of the PRA Rulebook | 2 |
| SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) | 3 | |
| SS20/15 ‘Supervising building societies’ treasury and lending activities’ | 3 | |
| 5. Capital buffers | SoP ‘The PRA’s approach to the implementation of the systemic risk buffer’ | 3 |
| SoP ‘The PRA’s methodologies for setting Pillar 2 capital’ | 3 | |
| SoP ‘The PRA’s approach to identifying other systemically important institutions (O-SIIs)’ | 3 | |
| SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ | 3 | |
| SS6/14 ‘Implementing CRD IV: Capital buffers’ | 3 | |
| SS45/15 ‘The UK leverage ratio framework’ | 3 | |
| SS16/16 ‘The minimum requirement for own funds and eligible liabilities (MREL) – buffers and Threshold Conditions' | 3 | |
| The PRA’s approach to banking supervision | 3 | |
| 6. MDA | The Capital Buffers Part of the PRA Rulebook | 1,2 |
| SS6/14 ‘Implementing CRD IV: Capital buffers’ | 3 | |
| 7. Pillar 2 | SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ | 3 |
| 8. Governance | The General Organisational Requirements Part of the PRA Rulebook | 1 |
| SS28/15 ‘Strengthening accountability in banking’ | 3 | |
| 9. Variable risk weights for real estate exposures | The Credit Risk Part of the PRA Rulebook | 1 |
| 10. Methods of consolidation | The Groups Part of the PRA Rulebook | 1,2 |
| SS15/13 ‘Groups’ | 3 |
Implementation
Some of the measures in CRR II, and the UK transposition of CRD V, come into effect on Monday 28 or Tuesday 29 December 2020. In accordance with the EU (Withdrawal Agreement) Act 2020, the version of the CRR which applies in the UK at 11pm on Thursday 31 December 2020 will become ‘retained EU law’ through the operation of the EU (Withdrawal) Act 2018.
Responses and next steps
This consultation closes on Tuesday 17 November 2020. Please note that this is a shortened consultation period, which is necessary to meet the transposition date for CRD V (Monday 28 December 2020).
The PRA invites feedback on the proposals set out in this consultation, and also on the specific questions included in Chapters 4 and 6. The PRA would also welcome firms’ views on whether additional and material costs not identified in Chapter 11, including for holding companies, may arise as a result of the proposals. Please address any comments or enquiries to CP17_20@bankofengland.co.uk.
- Appendix 1: Draft Rules instruments (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 2: Draft Rules EU Exit instruments (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 3: Draft Statements of Policy and Supervisory Statements (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 4: Draft Capital Buffers and Pillar 2A Model Voluntary Requirement (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window
- Appendix 5: Holding companies approval: Indicative information template (pdf) Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window Opens in a new window