Feb. 2025 Firm-Specific Capital Communications Policy Statement
On Feb. 12, 2025, UK PRA issued policy statement (PS) 2/25 Streamlining firm-specific capital communications, giving final policy in response to chapter 3 of the consultation.
Following analysis of responses received, PRA is finalizing the rule amendments and changes to supervisory statement SS45/15The UK leverage ratio framework as proposed, and makes one small change to SS31/15The ICAAP and the SREP.
New policy and rules will take effect on Mar. 31, 2025, consistent with the consultation.
PRA states firms are not required to take any specific actions to implement changes.
On Sep. 12, UK PRA proposed streamlined Pillar 2A capital framework.
PRA issued consultation paper CP9/24, Streamlining the Pillar 2A capital framework and the capital communications process, as part of banking capital package of papers.
On same date UK PRA issued package on Basel 3.1 and bank capital, see #226066.
And UK PRA also published near final rules on Basel 3.1 standards, see #226103.
On same day UK PRA proposed small domestic deposit takers' regime, see #226241.
Simultaneously UK PRA proposed to restate CRR requirements as rules, see #226266.
In same package UK PRA proposed to streamline buffers policy material, see #226278.
On same date UK Treasury issued bank prudential framework legislation, see #226296.
Consultation Paper
Sets out proposal to streamline the Pillar 2A capital framework and capital communications process, concerns retiring the refined methodology to Pillar 2A.
Streamlining firm-specific capital communications (Voluntary Requirements under S. 55M(5) FSMA (‘VReqs’) and directions under S. 192C FSMA (‘s192C Directions’)).
Minor clarifications to the interest rate risk in the banking book (IRRBB) and pension obligation risk Pillar 2A approaches, lists proposed changes to policy materials.
Retiring Refined Methodology to Pillar 2A
PRA sets out proposal to retire refined methodology in light of implementation of Basel 3.1 standards (as set out in PS17/23 and PS9/24 and proposed for SDDTs in CP7/24) and broader reforms which promote safety and soundness, address competition issues.
Will continue to exercise supervisory judgement when setting a firm's Pillar 2A capital in order to ensure that required amount supports sound management, covers risks.
As part of implementing Basel 3.1 standards, PRA would introduce a more structured and granular exposure allocation and greater risk sensitivity to the credit risk SA.
Firm-Specific Capital Communications
PRA proposes to simplify content and process of firm-specific capital communications, with no impact on firms' capital requirements, including amending Capital Buffers part of the PRA Rulebook to reflect any Pillar 2A capital and systemic buffers set by PRA.
Amend Leverage Ratio - Capital Requirements and Buffers part to set out Additional Leverage Ratio Buffer (ALRB) requirements, including calculation methodology.
Changes proposed do not impact firm-specific capital requirements but simplify the regulatory framework when Pillar 2A and systemic buffers are applied.
Would deliver simpler Pillar 2A capital communications, enabling stakeholder engagement, facilitating policy implementation, supporting transparency and clarity.
PRA proposes to clarify its existing Pillar 2A approaches for IRRBB and pension obligation risks, proposed changes do not aim to change PRA approach to these risks.
Effectiveness
The closing date for the submission of responses to the consultation is Dec. 12, 2024.
PRA proposes to align the implementation date for retiring the refined methodology to Pillar 2A with the date of implementation of Basel 3.1 standards, i.e. Jan. 1, 2026.
For all firms except Interim Capital Regime (ICR) firms and ICR consolidation entities.
In Jan. 2025, UK PRA delayed implementing Basel 3.1 in UK to Jan. 1, 2027, #226103.
Feb. 2025 Firm-Specific Capital Communications Policy Statement
On Feb. 12, 2025, UK PRA issued policy statement (PS) 2/25 Streamlining firm-specific capital communications, giving final policy in response to chapter 3 of the consultation.
Following analysis of responses received, PRA is finalizing the rule amendments and changes to supervisory statement SS45/15The UK leverage ratio framework as proposed, and makes one small change to SS31/15The ICAAP and the SREP.
New policy and rules will take effect on Mar. 31, 2025, consistent with the consultation.
PRA states firms are not required to take any specific actions to implement changes.
Regulators
UK PRA
Entity Types
Bank; BS; Inv Co
Reference
PS2/25, 2/12/2025; CP9/24, 9/12/2024; Basel 3.1; IRRBB: Citation: SS45/15; SS31/15; PRA2025/1; PRA RB; Glossary; Leverage Ratio - Capital Requirements and Buffers; Disclosure (CRR); Reporting (CRR); Capital Buffers; Own Funds and Eligible Liabilities (CRR);
