PRA finalises BRRD rules: PRA has published a policy statement with final rules on its consultation on implementing the BRRD, together with supervisory statements on recovery planning and resolution planning and materials on intra-group financial support. PRA says most of the responses it received focused on recovery planning requirements and contractual clauses recognising bail-in powers. Respondents had commented that the BRRD does not require a wind-down analysis, but PRA points out it is a minimum harmonisation directive that allows Member States to take additional measures. It says it considers a wind-down analysis is important for firms with large trading books. On contractual recognition of bail-in powers, respondents favoured a phased implementation, and PRA will allow this, over the next period until 1 January 2016. PRA has made other minor changes to its proposals to reflect responses and clarify areas of doubt. Most of PRA's new rules and supervisory statements are already in force, except those requiring contractual clauses in eligible debt instruments, which will take effect from 19 February 2015. The five new rule instruments form part of the new-look PRA Rulebook. (Source: PRA Finalises BRRD Rules)

PRA consults on Pillar 2 capital adequacy: PRA is consulting on changes to its Pillar 2 framework. It thinks it needs to review both its rules and supervisory statements in the light of the fourth Capital Requirements Directive (CRD 4) and EBA's guidelines on the Supervisory Review and Evaluation Process (SREP). The paper covers:

  • how PRA plans to realign its Pillar 2 framework with its approach document and improve its own Pillar 2A capital methodologies to be more risk-sensitive;
  • Pillar 2A methodologies: PRA outlines how it will determine Pillar 2A capital for credit risk, operational risk, credit concentration risk and pension obligation risk alongside its existing approaches for market risk, counterparty credit risk and interest rate risk in the non-trading book;
  • how PRA will operate the new buffer regime;
  • governance and risk management and how PRA will take weaknesses under Pillar 2; and
  • the impact of the reforms on capital disclosure.

PRA notes the paper does not cover liquidity and funding risk, or the MREL under the BRRD and says it will consult separately later in the year on applying the Pillar 2 framework to ring-fenced banks. The paper annexes a draft new reporting instrument with templates, a new supervisory statement on the Internal Capital Adequacy Assessment Process (ICAAP) and the SREP and a statement of policy on PRA's methodology for setting Pillar 2 capital. It asks for responses by 17 April and plans to implement the new framework from 1 January 2016. (Source: PRA Consults on Pillar 2 Capital Adequacy)