Coronavirus (COVID-19)—PRA issues update on priority areas of work

Coronavirus (COVID-19)—PRA issues update on priority areas of work

In light of the coronavirus (COVID-19) pandemic, the Prudential Regulation Authority (PRA) has issued an update on its plans to support firms and enable them, and the PRA, to focus their resources on the highest priority work. The PRA’s work, alongside that of the wider Bank of England (BoE), is ‘focused on ensuring that banks and insurers can play their part in supporting the UK economy to respond to the significant impact of COVID-19’.

The update follows the joint announcement on 20 March 2020 from the BoE and the PRA, setting out a number of measures aimed at alleviating operational burdens on PRA-regulated firms. It sets out updates and timescales in the following areas:  

• climate change—including postponement of the Climate Biennial Exploratory Scenario until at least mid-2021

• LIBOR transition—the PRA and Financial Conduct Authority have decided to resume full supervisory engagement on LIBOR from 1 June 2020, including data reporting at the end of Q2

• the Insurance Stress Test—the PRA has decided to pause further work on the Insurance Stress Test. It will therefore not be publishing the results of the 2019 test and will postpone the next one to 2022, with a view to seeking feedback from firms on the proposed design during Q4 2021

• stressed VAR—the PRA does not expect firms to update their SVAR 12-month period during the current period of financial market stress, other than if a firm’s current period no longer represents a significant period of stress for the firm’s portfolio (eg due to a material change in risk profile). The Capital Requirements Regulation (EU) No. 575/2013 requires firms to review the choice of historical data at least annually and, although in normal circumstances the PRA has set an expectation of quarterly reviews, in the current circumstances it will permit firms to delay this review until December 2020, in line with European Banking Authority guidance

The BoE and the PRA have also announced changes to resolution measures aimed at alleviating operational burdens on PRA-regulated firms.

Further details on the UK’s regulatory pipeline can be found on the Regulatory Initiatives Grid, published by the Financial Services Regulatory Initiatives Forum. The Grid sets out the planned regulatory workplan over the next 12 months. The PRA says it will help firms understand and plan for the timing of initiatives that may have a significant operational impact on them. 

Source: Statement by the Prudential Regulation Authority on prioritisation in light of COVID-19

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