PS1/25 – Resolution assessments: Amendments to reporting and disclosure dates

1: Overview

1.1 This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses the PRA received to consultation paper (CP) 12/24 – Resolution assessments: Amendments to reporting and disclosure dates. It also contains the PRA’s final policy (taking effect on 10 January 2025), which provides greater flexibility over the timing of Resolution Assessment report submissions and disclosures by moving from fixed two-year cycles to a periodic basis. The PRA’s final policy is reflected in:

• amendments to the Resolution Assessment Part of the PRA Rulebook (Appendix 1);
• an updated supervisory statement (SS) 4/19 – Resolution assessment and public disclosure by firms (Appendix 2).

1.2 This PS is relevant to the UK banks and building societies to which the Resolution Assessment Part applies (‘firms’).^{footnote [1]}

Background

1.3 In CP12/24 the PRA proposed to amend rules 3.1 and 4.1 of the Resolution Assessment Part so that the timing of future report submissions and disclosures would no longer be fixed to two-year cycles. It proposed that firms would continue to be subject to reporting and disclosure obligations on their preparations for resolution on a periodic basis, with the expected dates to be communicated by the PRA well in advance. More details on the PRA’s expectations for the timings of reports and disclosures would be set out in SS4/19.

1.4 In determining its policy, the PRA considers representations received in response to consultation, publishing an account of them and the PRA’s response (‘feedback’). In this PS, the ‘Summary of responses’ section below contains a general account of the representations made and the ‘Feedback to responses’ chapter contains the PRA’s feedback.

1.5 In carrying out its policy making functions, the PRA is required to have regard to various matters. In CP12/24 the PRA explained how it had regard to the most relevant of these matters in relation to the proposed policy. The ‘Changes to draft policy’ section of this chapter refers to that explanation, taking into account consultation responses where relevant.

Summary of responses

1.6 The PRA received four responses to the CP. The names of respondents to the CP who consented to their names being published are set out at Appendix 3.

1.7 All respondents supported the PRA’s proposal. Respondents made a small number of suggestions which are set out in Chapter 2.

1.8 Some responses included comments and suggestions that did not relate directly to the proposal under consultation, including comments on the threshold at which firms come into scope of the Resolution Assessment rules. The PRA indicated in CP12/24 that it may consider reviewing this threshold in due course. The PRA can confirm it will be undertaking such a review and will consider these responses as part of that process. Respondents also provided broader suggestions about the Resolution Assessment Framework. The PRA has not provided feedback to these responses in this PS, but will consider the points raised in any further policy development and during the planning of future assessments of firms’ resolvability.

Changes to draft policy

1.9 This PS takes account of how the policy advances the PRA’s objectives and of significant matters that the decision maker had regard to. On 14 November 2024, HM Treasury issued a new set of recommendations about aspects of the Government’s policy to which the PRA should have regard. The PRA has reviewed those recommendations and concluded that those recommendations do not impact the analysis of the PRA’s objectives and the ‘have regards’ as set out in CP12/24.

1.10 When making rules, the PRA is required to comply with several legal obligations. In CP12/24, the PRA published its explanation of why the rules proposed were compatible with its objectives and with its duty to have regard to the regulatory principles.^{footnote [2]} The PRA has not made changes to the rule instrument consulted on, and the explanation provided in the CP remains unchanged.^{footnote [3]}

1.11 Having reviewed the responses to CP12/24, the PRA has made minor changes to paragraph 7.6 of SS4/19 to elaborate on the context in which the PRA might need to alter expected dates for reports or disclosures after they have been communicated, and how the PRA would engage with firms before making such a change. The PRA considers that the additional clarity provided is beneficial to firms. The PRA has also made minor textual amendments to SS4/19 for consistency of language. The changes do not affect the analysis in CP12/24 regarding the impact of the proposal on the PRA’s objectives, the ‘have regards’ analysis and the cost benefit analysis. The PRA considers that the changes will not have a different impact on mutuals compared to other firms.

Implementation

1.12 The amended rules 3.1 and 4.1 of the Resolution Assessment Part of the PRA Rulebook, and SS4/19, take effect on 10 January 2025.

1.13 The PRA has today separately communicated the dates by which it next expects firms to submit reports under Resolution Assessment 3.1 and publish disclosures under Resolution Assessment 4.1.

1.14 References related to the UK’s membership of the EU in the SS4/19 covered by the policy in this PS have been updated as part of this PS to reflect the UK’s withdrawal from the EU. Unless otherwise stated, any remaining references to EU or assimilated legislation refer to the version of that legislation which forms part of assimilated law.^{footnote [4]}

2: Feedback to responses

2.1 Before making any proposed rules, the PRA is required by the Financial Services and Markets Act 2000 (FSMA) to have regard to any representations made to it in response to consultation, and to publish an account, in general terms, of those representations and its feedback to them.^{footnote [5]}

2.2 The PRA has considered the representations received in response to the CP. This chapter sets out the PRA’s feedback to those responses, and its final decisions.

2.3 The PRA proposed to amend rules 3.1 and 4.1 of the Resolution Assessment Part so that the timing of future reports and disclosures would no longer be fixed to two-year cycles. Firms would continue to be subject to reporting and disclosure obligations on their resolvability on a periodic basis, with more details on the timings and the process set out in SS4/19. The PRA’s expectations on firms as to the reporting and disclosure dates would be communicated well in advance of each cycle, taking account of the need to provide time for firms to plan and prepare their reports and disclosures.

2.4 Respondents were supportive of the proposal. One respondent suggested that the PRA should set an assumption that reports and disclosures would take place every three years unless there were exceptional circumstances.

2.5 Having considered the response, the PRA has decided not to prescribe a regular frequency of assessments in its policy. The PRA considers it appropriate to maintain the expectation that firms are not expected to report more frequently than every two years, as noted in paragraph 7.4 of SS4/19. The PRA and the Bank of England will consider relevant factors in deciding the timing of resolution assessment reports and disclosures, including firms’ resolvability progress, other regulatory obligations on firms, and wider developments, as appropriate.

2.6 One respondent suggested that the PRA should not be able to bring forward (to make earlier) an expected date for reports or disclosures once the date had been communicated. Having considered the response, the PRA is of the view that there might be a need to amend a previously communicated expected reporting or disclosure date in response to circumstances that were not anticipated at the time the dates were communicated. The PRA considers that it is important to retain the flexibility to amend the expected dates for one or more firms if needed, whether this is initiated by the PRA or in response to a request from one or more firms, as the PRA has done previously in 2020 and 2024.^{footnote [6]} As stated in paragraph 7.6 of the draft SS4/19, this would be done following engagement with affected firms. The PRA is mindful that bringing forward an expected reporting or disclosure date would be more operationally challenging for firms than the delays in 2020 and 2024. The PRA anticipates that, in practice, if the PRA needs to amend an expected date it would be more likely to postpone the date rather than bring it forward. If, exceptionally, a date was to be brought forward, the PRA would consider the practicability of such a change and engage with firms first. The PRA has amended paragraph 7.6 of SS4/19 to elaborate on when and how the PRA might need to amend previously communicated dates.

2.7 Two respondents asked how firms should manage the proximity between recovery and resolution planning submissions, which are often handled by the same teams within a firm. In setting the expected dates for recovery plans and resolution assessment reports, the PRA will be mindful of the potential for overlap, alongside other relevant factors. The PRA will continue to engage with relevant firms as appropriate on this.

2.8 One respondent said that firms could incur additional costs from more extensive testing and potential use of third parties as a result of the proposal. After considering the response, the PRA has maintained the view that the cost benefit analysis presented in CP12/24 remains appropriate. The testing costs would arise from a firm’s existing obligations to: prepare for resolution;^{footnote [7]} carry out an adequate and realistic assessment of its preparations;^{footnote [8]} and undertake testing, at a suitable level of independence to ensure robustness, to substantiate its assessment.^{footnote [9]} These costs do not arise from the CP proposal which makes the reporting and disclosure dates more flexible (and no more frequent than present).