Banking and financial regulatory news, June 2021 | Hogan Lovells
- Resolutions assessment: PRA PS10 / 21 on changes to declaration and publication dates
- OCIR: PRA PS9 / 21
- OCIR: BoE updates SOPs on resolvability assessment framework
- NPL securitizations: PRA CP10 / 21 on the implementation of Basel standards
- UK bank blocking legislation: FMLC working group
- CRD: EBA updates ITS for 2022 benchmarking of internal approaches
- CRR: EBA consults on the disclosure by institutions of exposure to interest rate risk under pillar 3
- EBA Annual Report 2020
- Public interest assessment of the resolution framework: the SRB revises its approach
After a short hiatus, the next update will be released on June 21, 2021.
Resolutions assessment: PRA PS10 / 21 on changes to declaration and publication dates
Following its consultation in CP19 / 20, the UK’s Prudential Regulation Authority (PRA) issued a policy statement, PS10 / 21, on changes to the reporting and disclosure dates for resolution assessments. PS10 / 21 applies to UK banks and building societies with £ 50 billion or more in retail deposits on an individual or consolidated basis, as of the date of their most recent annual accounts.
Following CP19 / 20, the PRA amended paragraph 2.11 of its prudential statement SS4 / 19: Resolution assessment and publication by companies, to remove the proposed expectation that the assessment of companies in 2021 should also include the progress made and the remaining steps to be taken. necessary to comply with the revised Business Continuity Policy in Resolution (OCIR). This change confirms that for their first report in October 2021, companies must assess their compliance with the OCIR policy that came into effect on January 1, 2019.
The annexes to PS10.21 contain:
The PRA advises companies to also refer to its policy statement, PS9 / 21, on revisions to its policy on OCIR and the Bank of England (BoE) policy statement (SoP) on its approach. resolvability assessment (see below).
OCIR: PRA PS9 / 21
Following its consultation in CP20 / 20, the PRA issued a policy statement, PS9 / 21, on revisions to its policy on OCIR.
In response to comments, the PRA changed the definition of “critical services”. The term will henceforth refer to both critical functions and basic trades and the proposed term “essential services” will not be introduced. The PRA also decided to postpone the implementation of the revised OCIR policy to January 1, 2023, 12 months after the January 1, 2022 application date proposed in PC20 / 20.
The annexes to PS9 / 21 present the final versions of:
The changes and SS4 / 21 come into effect on January 1, 2023. The PRA emphasizes that the current business continuity part and SS9 / 16 will remain in place until that date and that, therefore, companies will continue to be responsible for their ensure that they continue to adhere to the existing OCIR policy as they work to implement the revised policy.
The BoE has amended some of its policy statements on the resolution evaluation framework to reflect the revised OCIR policy of the PRA (see below).
OCIR: BoE updates SOPs on resolvability assessment framework
The BoE has posted updated versions of the following SOPs on its website:
The BoE revised the SOPs to reflect the publication of PRA PS9 / 21 on updates to its policy on OCIR (see above). The BoE made the changes it consulted on in October 2020, as well as revisions to reflect the changes in the PRA approach at OCIR, as outlined in PS9 / 21.
The BoE says its assessment of corporate resolvability in 2021 and 2022 will focus on the OCIR PRA policy which came into effect on January 1, 2019, taking into account the January 1, 2023 effective date for the policy. PRA’s revised OCIR.
NPL securitizations: PRA CP10 / 21 on the implementation of Basel standards
The PRA has published a consultation paper, CP10 / 21, setting out its proposed rules for the implementation of prudential standards agreed by the Basel Committee on Banking Supervision (BCBS) for non-performing loan securitizations (NPLs). . It explains how the PRA proposes to define securitizations of non-performing exposures (NPEs) and proposes modifications to the associated treatment of own funds.
The proposals would result in the addition of a new part on securitization of non-performing exposures in the PRA Rulebook and changes to SS10 / 18: Securitization: general requirements and capital framework.
The consultation ends on July 26, 2021. The PRA proposes that the changes resulting from PC10 / 21 be implemented on January 1, 2022. It indicates that the changes would take effect in conjunction with any consequential change to the retained version of the law of the ‘EU capital requirements. Settlement by Her Majesty’s Treasury.
UK bank blocking legislation: FMLC working group
The Financial Markets Law Committee (FMLC) has published a letter to Keith Skeoch, Chairman of the Ring-fencing and Proprietary Trading Independent Review, outlining the remit and results of its recently formed task force on legal uncertainties related to the ring-fenced banking sector. arising from the 2013 Financial Services (Banking Reform) Act.
The FMLC explains that the work of the working group parallels the work of the Review, which largely focuses on policy issues or aspects of the regime that do not involve any issue of legal uncertainty. However, the work of the FMLC may overlap with some of the Review’s questions regarding the appropriateness of aspects of the regime and whether there are unintended consequences.
The working group will produce a document identifying and suggesting how the legal uncertainties could be eliminated or improved. It does not expect to complete its work by the deadline for responding to the Journal’s call for contributions of June 13, 2021 and expects to share the document with the Journal by the end of July 2021. He will also share the document with HM Treasury in the hope that the FMLC’s suggestions can be taken into account.
CRD: EBA updates ITS for 2022 benchmarking of internal approaches
The European Banking Authority (EBA) has published a final report on draft implementing technical standards (TSIs) updating Commission Implementing Regulation (EU) 2016/2070 on the calibration of internal models. Commission Implementing Regulation (EU) 2016/2070 contains TSIs specifying the information that companies must report to EBA and competent authorities in order to allow the assessment of internal approaches for calculating capital requirements. in accordance with Article 78 of the Capital Requirements Directive (CRD) (the benchmarking exercise).
The updated draft TSI contains all the portfolios and benchmarking measures that will be used for the 2022 benchmarking exercise. The exercise covers the approved internal approaches used for the calculation of risk capital requirements. credit and market, as well as the internal models used for IFRS 9. The update also includes modifications and clarifications of the draft TSI, on which the EBA consulted in December 2020.
The EBA has separately published annexes (scroll down to link at the bottom of the page) to the draft TSI which replace or are added to the existing set of models to create a consolidated version of the draft TSI package update.
He will submit the draft TSI to the European Commission for approval. The technical standards will apply 20 days after their publication in the Official Journal of the European Union.
CRR: EBA consults on the disclosure by institutions of exposure to interest rate risk under pillar 3
The EBA has published a consultation document on the draft TSI amending Implementing Regulation (EU) No 637/2021 concerning the publication of information on exposure to interest rate risk on positions not held in the trading book in accordance with Article 448 of the Capital Requirements Regulation (CRR).
Article 448 of the CRR requires institutions to publish, from June 28, 2021, quantitative and qualitative information on the risks resulting from potential variations in interest rates that affect both the economic value of equity and the income. net interest from their non-trading book activities referred to in Article 84 and Article 98 (5) of the CRD. To implement this disclosure, EBA has drawn up these draft TSIs amending Implementing Regulation (EU) 637/2021.
The EBA has separately published models and instructions in Annexes I and II of the consultation document.
The deadline for responses is August 30, 2021. EBA intends to submit the draft TSI to the European Commission in October 2021.
EBA Annual Report 2020
The EBA has released its Annual Report 2020 which provides a detailed account of all the work the EBA has done over the past year and anticipates the main areas of interest for the coming year. These include the revision of the stress testing framework, the implementation of mandates in the field of the fight against money laundering and the financing of terrorism, financial innovation and sustainable finance.
Public interest assessment of the resolution framework: the SRB revises its approach
The Single Resolution Board (SRB) issued an addendum outlining its revised approach to assessing the public interest in resolution planning.
CRU’s updated approach takes into account that bank failure can occur not only as part of an idiosyncratic scenario, but also as part of a broader financial instability or systemic event. The SRB explains that this reinforces the choice of the best resolution strategy to protect European taxpayers and promote the financial stability of the EU.
Sebastiano Laviola, Director of Resolution Strategy and Policy Coordination at the SRB, explains the new approach and areas for possible future improvement, in a blog.