Statement by the PRA on the Capital Requirements ...

The CRR 'Quick Fix' accelerates the date of application of the revised SME support factor and the infrastructure support factor. It also ... Ouruseofcookies Weusenecessarycookiestomakeoursitework(forexample,tomanageyoursession).We’dalsoliketousesomenon-essentialcookies(includingthird-partycookies)tohelpusimprovethesite.Byclicking‘Acceptrecommendedsettings’onthisbanner,youacceptouruseofoptionalcookies. Necessarycookies Analyticscookies   Yes Yes Acceptrecommendedcookies Yes No Proceedwithnecessarycookiesonly Necessarycookies Necessarycookiesenablecorefunctionalityonourwebsitesuchassecurity,networkmanagement,andaccessibility.Youmaydisablethesebychangingyourbrowsersettings,butthismayaffecthowthewebsitefunctions. Analyticscookies Weuseanalyticscookiessowecankeeptrackofthenumberofvisitorstovariouspartsofthesiteandunderstandhowourwebsiteisused.FormoreinformationonhowthesecookiesworkpleaseseeourCookiepolicy. Skiptomaincontent Home Prudentialregulation StatementbythePRAontheCapitalRequirementsRegulation(CRR)‘QuickFix’package StatementbythePRAontheCapitalRequirementsRegulation(CRR)‘QuickFix’package ThisstatementsetsoutthePRA’sviewsonsomeoftheCRR‘QuickFix’requirements,includingsomeguidanceforfirms. Publishedon 30June2020 From27June2020,amendmentstotheCapitalRequirementsRegulation(CRR)-theCRR‘QuickFix’appliedthatrespondtotheCovid-19pandemic.footnote[1]InaccordancewiththeEuropeanUnion(WithdrawalAgreement)Act,theCRR‘QuickFix’appliesdirectlytoPRA-regulatedfirms.ThisstatementsetsoutthePRA’sinitialviewsonthefollowingmeasuresincludedinthepackage:footnote[2]TransitionalarrangementsforcapitalimpactofIFRS9ExpectedCreditLoss(ECL)accounting.AccelerationofthedateofapplicationofcertainCRRIImeasuresthathadbeenduetoapplyfromMonday28June2021:arevisedsmallandmedium-sizedenterprises(SME)supportfactor;aninfrastructuresupportfactor;andnon-deductionofcertainsoftwareassetsfromCommonEquityTier1(CET1)capital.Discretiontoapplyatemporaryprudentialfiltertocertainunrealisedgainsorlossesmeasuredatfairvaluethroughothercomprehensiveincome.TransitionalarrangementsforcapitalimpactofIFRS9ExpectedCreditLoss(ECL)accountingTheCRR‘QuickFix’introducesnewtransitionalarrangementsforthecapitalimpactofIFRS9ECLprovisions.ForrelevantprovisionsraisedfromWednesday1January2020,theCET1add-backpercentagesaresetat100%in2020and2021,75%in2022,50%in2023,and25%in2024.footnote[3]ThePRA’sviewsOnMonday25September2017,SamWoods,DeputyGovernor,wrotetoCEOshighlightingandsupportingargumentsinfavourofIFRS9transitionalarrangements.footnote[4]TheCRR‘QuickFix’revisesthetransitionalarrangements.ItimplementstheagreementoftheBaselCommitteeonBankingSupervision(BCBS)inApril2020.footnote[5]ThePRA’sintentionremainsthat,subjecttotheneedforsufficientresilienceattheendofthetransitionalperiod,allaspectsofsupervisionofafirmusingthetransitionalarrangementswouldbecarriedoutusing‘transitional’dataoncapitalresourcesandnot‘fullyloaded’figures.Inparticular,asstresstestsshouldreflecthowstresswouldbeexperienced,thosetestsshouldfullytakeaccountoftherevisedtransitionalarrangements.ThePRA’sintentionremainsthat,subjecttotheneedforsufficientresilienceattheendofthetransitionalperiod,allaspectsofsupervisionofafirmusingthetransitionalarrangementswouldbecarriedoutusing‘transitional’dataoncapitalresourcesandnot‘fullyloaded’figures.Inparticular,asstresstestsshouldreflecthowstresswouldbeexperienced,thosetestsshouldfullytakeaccountoftherevisedtransitionalarrangements.FollowupFirmsalreadyapplyingtheCRRtransitionalarrangementsforIFRS9willneedtoimplementtherevisedcalculationssetoutintheCRR‘QuickFix’,includingamendingtheCET1add-backfactorsappliedtorelevantECLprovisionsfor2020–24.Firmscurrentlyapplyingthetransitionalarrangementsthatareconsideringceasingtoapplythemshouldnotethat,undertheCRR,doingsowouldrequirethePRA’spermission.IfafirmwishestoapplyforPRApermissionnolongertoapplythetransitionalarrangements,weencourageittocontactitsPRAsupervisorwitharequestbyFriday31July2020,includingawrittenexplanationofthebasisonwhichitsmanagementbodyhassatisfieditselfofthecontinuingadequacyofthefirm’sfinancialresources,includinginstressedscenarios.Itssupervisorwilldiscussthematterwithitinthecontextofsupervisionofthefirm’sresilienceandcapitaladequacy.AccelerationofcertainCRRIImeasures,andatemporaryprudentialfilteroncertainunrealisedgainsandlossesTheCRR‘QuickFix’acceleratesthedateofapplicationoftherevisedSMEsupportfactorandtheinfrastructuresupportfactor.ItalsoincludesatemporarydiscretionforfirmsuntilSaturday31December2022toremoveaproportionofunrealisedgainsandlossesonexposurestocertainpublicsectorauthorities.TheCRR‘QuickFix’alsoappliestherevisedtreatmentofsoftwareassetsfromthedateonwhichEBAregulatorystandardsthatwillspecifytheirprudentialtreatmententerintoforce.footnote[6]ThePRA’sviewsThesemeasuresdonotderivefromBCBSagreementsandarespecifictotheCRR.ThePRAdoesnotcurrentlyhaveadequateinformationontheirquantitativeimpact.ThePRAwouldliketounderstandbettertheirimpactonfirms’capitalpositions,andanyimplicationstheymayhaveforfirms’safetyandsoundness.FollowupThePRAintendstorequestdatatofacilitatequantitativeanalysisoftheimpactoftheseCRR‘QuickFix’measures.Analysisofthosedata,andtheEBA’sfinalregulatorytechnicalstandardsonsoftwareassets,willinformthePRA’ssupervisoryapproachincludinganassessmentofwhetherfurtheractionisnecessaryunderPillar2.Regulation(EU)2020/873oftheEuropeanParliamentandoftheCouncilof24June2020TheCRR‘QuickFix’alsoincludesmeasurescovering:marketriskmodelback-testing;thecalculationofleverageexposureundertheCRRleverageratio;theGloballySystemicallyImportantInstitutionsleveragebuffer;theStandardisedApproachtoCreditRisktreatmentofloanscoveredbysalaryorpensionpayments;andatemporarytreatmentofpublicdebtissuedinthecurrencyofanotherEUMemberState.TheCRRmodifiestheperiodstowhichtheseadd-backpercentagesapplyforfirmswithafinancialyearstatinglaterthan1January2020.LetterfromSamWoodsontransitionalarrangementsforcapitalimpactofIFRS9expectedcreditlossaccountingBaselCommitteesetsoutadditionalmeasurestoalleviatetheimpactofCovid-19TheEBAiscurrentlyconsultingonthesedraftregulatorytechnicalstandards.TheEBAiscurrentlyconsultingonthesedraftregulatorytechnicalstandards.CloseBaselCommitteesetsoutadditionalmeasurestoalleviatetheimpactofCovid-19CloseLetterfromSamWoodsontransitionalarrangementsforcapitalimpactofIFRS9expectedcreditlossaccountingCloseTheCRRmodifiestheperiodstowhichtheseadd-backpercentagesapplyforfirmswithafinancialyearstatinglaterthan1January2020.CloseTheCRR‘QuickFix’alsoincludesmeasurescovering:marketriskmodelback-testing;thecalculationofleverageexposureundertheCRRleverageratio;theGloballySystemicallyImportantInstitutionsleveragebuffer;theStandardisedApproachtoCreditRisktreatmentofloanscoveredbysalaryorpensionpayments;andatemporarytreatmentofpublicdebtissuedinthecurrencyofanotherEUMemberState.CloseRegulation(EU)2020/873oftheEuropeanParliamentandoftheCouncilof24June2020Close 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