BANKING

BCBS final guidelines for identification and management of step-in risk

The Basel Committee on Banking Supervision (BCBS) has published final guidelines for the identification and management of step-in risk. Step-in risk refers to the risk that a bank provides financial support to an entity beyond, or in the absence of, its contractual obligations should the entity experience financial stress. The guidelines help mitigate the risk that potential distress faced by shadow banking entities spills over to banks and p-in risk refers to the risk that a bank provides financial support to an entity beyond, or in the absence of, its contractual obligations should the entity experience financial stress and are part of the G20's initiative to strengthen the oversight and regulation of the shadow banking system

BCBS on 25 Oct 2017

PRA clarify IFRS 9 for 2018 ICAAP stress testing and capital planning

The PRA has updated its webpage on stress test scenario to clarify how firms should incorporate International Financial Reporting Standard 9 (IFRS 9) into stress testing and capital planning carried out as part of their internal capital adequacy assessment process (ICAAP) obligations from 2018. The update covers the information firms should consider and include in their ICAAP reports produced in 2017. The aim is to encourage firms applying IFRS to prepare forecasts for 2018 onwards on an IFRS 9 basis and to help the firms and PRA size and plan for the impact of IFRS 9.

Bank of England, PRA on 25 Oct 2017

FCA sets out purpose and scope of retail banking business model review

The FCA has published a paper setting out the purpose and scope of its strategic review of retail banking business models. The paper has been published by the FCA ahead of engaging with firms to gather information. It covers:

  • The context for the strategic review
  • How the FCA uses business model analysis in conduct and competition regulation
  • The changing face of retail banking and its potential effects on retail banking business models

FCA on 25 Oct 2017

INSURANCE

PRA consults on Solvency II matching adjustment

The PRA has published a consultation paper (CP21/17) on the application of the matching adjustment under the Solvency II Directive. The matching adjustment allows firms to adjust the relevant risk-free interest rate term structure for the calculation of a best estimate of a portfolio of eligible insurance obligations. The consultation paper has been developed by the PRA as part of its work on adjustments to the insurance prudential framework. This is in the light of experience following the UK introduction of Solvency II, including in areas recommended for reform by the Association of British Insurers and discussed with the Treasury Committee. Consultation closes to comments: 31 January 2018

Bank of England, PRA on 25 Oct 2017