PRA updates on CRR Permissions: PRA has issued guidance on applying for "CRR Permissions" to allow firms to use their own sensitivity positions for the purposes of the standardised approach for derivatives and bonds under the Capital Requirements Regulation (CRR). It has provided a form on which firms can apply for CRR Permissions in respect of interest rate risk on derivatives instruments. (Source: PRA Updates on CRR Permissions)

PRA consults on liquidity: PRA is consulting on draft rules and a draft supervisory statement on an update to its liquidity regime. The update follows the Commission's adoption of delegated legislation under the CRR, which takes effect at the end of the year and will be directly applicable in UK law from 1 October 2015. While PRA says it can retain the principles behind the current liquidity regime, the structural changes it proposes are fundamental. In particular, it will:

  • revoke the current rules in chapter 12 of the Prudential Sourcebook for Banks, Building Societies and Investment Firms (BIPRU), and carry the broad principles of BIPRU 12 over to the new regime;
  • apply an 80% liquidity coverage ratio (LCR) from 1 October 2015, 90% from 1 January 2017 and 100% from 1 January 2018;
  • carry forward add-ons outside the LCR as Pillar 2 add-ons until the firm's next liquidity review;
  • require all firms to ensure they can report all Common Reporting (COREP) liquidity returns daily;
  • require firms to integrate fully the operational requirements the delegated legislation imposes; and
  • not allow pre-positioned assets to meet PRA's quantitative liquidity guidance if the assets are not eligible for inclusion in the high quality liquid asset buffer.

PRA also proposes both to use its powers to go beyond the requirements of the EU where UK law already exceeds them and to include UK-designated investment firms within the regime, subject to any appropriate amendments. Also it will require third country firms to provide liquidity information on a whole-firm basis. The consultation includes draft new rules and a document mapping the BIPRU 12 rules to the Internal Liquidity Adequacy Assessment (ILAA) part of the proposed PRA rules. PRA asks for comment by 27 February 2015. (Source: PRA Consults on Liquidity)

PRA warns firms on LEI action: Paul Chapman of the Regulatory Data Group, part of the PRA, has written to alert firms to the need to act upon the recommendations of the EBA regarding the use of Legal Entity Identifiers (LEIs) published in January 2014. PRA believes LEIs will make significant contributions to the stability of the financial system and improve firms' risk management capabilities. The letter also alerts firms to the need to get an LEI code by 31 December 2014, at the latest. The letter tells firms to contact PRA by 5 December if they cannot comply. (Source: PRA Warns Firms on LEI Action)

PRA writes to insurers on reserving: PRA has written to general insurers to remind them of their obligation to set aside adequate technical provisions to meet the requirements of the Prudential Sourcebook for Insurers, and to apply a robust system of assessment with appropriate oversight. It reminds firms of considerations they should take into account and gives examples of some practices it might challenge. It is placing increasing emphasis on firms' assurances over the strength of their reserves. (Source: PRA Writes to Insurers on Reserving)