PRA Regulatory Digest – July 2023

The Prudential Regulation Authority (PRA) has published the latest version (July 2023) of its monthly regulatory digest. The digest outlines the Authority’s ongoing regulatory activities ranging from the launch of consultations, to the issuance of policy statements, to the implementation of regulatory changes and provides links to corresponding (legal) documents. The regulatory digest presents a viable source of information to stay up-to-date on regulatory issues and to ensure preparedness for upcoming changes as it furnishes a briefly summarized overview of all relevant ongoing issues. This latest version presents the following highlights, among others:
(1) The launch of Consultation Paper (CP15/23) as regards the introduction of new UK regulations concerning securitizations, thereby replacing existing firm-facing requirements from retained EU legislation with new rules under the PRA Rulebook. The proposed changes encompass various aspects such as risk retention, due diligence for institutional investors, transparency requirements for relevant entities, and more. Noteworthy alterations to EU law involve a ban on resecuritizations without PRA authorization and adjustments to risk retention for non-performing exposures. Feedback is also sought on disclosure requirements for public and private securitizations. The consultation will run through October 30, 2023 (please see EventID #22459 in this context for more information).
(2) The launch of Consultation Paper (CP13/23), a joint consultation of the PRA and the FCA as regards margining requirements in connection with non-centrally cleared derivatives. In it, both regulators propose to extend the temporary exemption from the UK bilateral margining requirement for single-stock equity and index options up to January 4, 2026 and continue to refrain from „pre-approval“ requirements for the application of individual initial margining models. The consultation will run through October 18, 2023 (please see EventID 22205 in this context).
(3) The launch of Consultation Paper (CP16/23) as regards proposed modifications to the UK’s approach for assessing G-SIIs and establishing a capital buffer requirement for such institutions. These changes are designed to harmonize the UK’s methodology with the Basel Committee for Banking Supervision’s 2022 alterations in assessing systemic significance for global banks. The adjustments include introducing a new indicator – „Trading Volume“ – under the „substitutability / financial institution infrastructure“ category, revising indicator weights, encompassing insurance subsidiaries‘ activities in the assessment, and eliminating outdated transitional provisions from the framework’s initial implementation in 2015. The consultation will run through August 29, 2023 (please see EventID 22444 in this context).
(4) The launch of Consultation Paper (CP14/23) as regards the ease of remuneration-related disclosure requirements of small CRR-regulated firms, institutions falling under the „simpler-regime“, and SNCI transitional firms. In it, the PRA proposes to only require certain disclosures within the REMA template and the disclosure of the REM 1 template by listed institutions falling within any one of the aforementioned three categories. Non-listed institutions would be entirely exempt from remuneration-related disclosure requirements. The consultation will run through September 20, 2023 (please see EventID 22344 in this context).
(5) The issuance of Policy Statement (PS10/23), a joint policy statement by the PRA and the FCA in connection with rule changes as regards the complaints scheme of both regulators. The PS describes the comments the regulators have received to their consultation on proposed modifications to the scheme and details the final changes the regulators are introducing. The final version of the scheme includes substantial adjustments compared to the draft version, including removing the £10,000 cap on compensatory payments for financial loss and expanding the explanation of non-financial loss compensation determination. The regulators have also introduced a biennial assessment of non-financial loss payment levels and clarified language regarding response timeframes. Notably, despite dissenting views, the regulators maintain the conditions for financial loss compensatory payments. The final rule changes will come into force on November 1, 2023 (please see EventID #22446 in this context for more information).
(6) The issuance of Policy Statement (PS11/23) as regards rule changes to modernize the credit union Rulebook and regulatory requirements while ensuring financial soundness and stability of these financial institutions. In its policy statement, the PRA outlines the feedback received to its consultation and sets out the new Rulebook provisions and the new supervisory statement (SS2/23) as they will apply from August 29, 2023. Notable changes to the draft include reorganizing the supervisory statement for better readability, adding a new permissible investment option, excluding certain investments from the counterparty concentration limit, and considering exit strategy limitations in institutional planning requirements. The final rule changes will come into force on August 29, 2023. Please see EventID #22517 in this context for more information.
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For more complete, detailed information, please refer to the enclosed Digest.