On January 19, 2015, the Prudential Regulation Authority (“PRA”) published a consultation paper on assessing Pillar 2 capital adequacy under CRD IV. Pillar 2 aims to ensure that firms have sufficient capital to cover potential risks not sufficiently addressed in the prescriptive Pillar 1 requirements. The consultation paper sets out proposed changes to the current framework, rules and supervisory statements, focusing on: (i) new proposed methodologies for determining Pillar 2A capital (which aims to strengthen the relationship between an institution’s risk profile, risk management and risk mitigation systems); (ii) the buffer and the form it would take; (iii) governance and risk management; and (iv) disclosure. The consultation period closes on April 17, 2015. The PRA plans to publish its policy statement and final rules together with a supervisory statement in July 2015. It is expected that the new rules would apply from January 1, 2016.

The consultation paper is available at: http://www.bankofengland.co.uk/pra/Pages/publications/cp/2015/cp115.aspx.