We recently sponsored a webinar - hosted by UK Finance - focussing on the key requirements of which banks must take account with respect to their current or planned relationships with deposit aggregators. Download a copy of the slides here.

PRA in the supervisory statement SS2/24 outlines requirements around solvent exit planning and execution. This article summarises the requirements and provides specific action points that small- and medium-sized banks can consider to implement these requirements.

In this webinar, we will provide an overview of the key requirements banks must take account of with respect to their current or planned future relationships with deposit aggregators. Specifically, this will include: Prudential risk: liquidity risk management and liquidity stress testing implications; Liquidity regulatory reporting: implications for calculation and treatment of deposits; and, Depositor protection (Financial Services Compensation Scheme coverage), and third party and outsourcing risk.

NMD are liabilities whereby the depositor is free to withdraw their deposit at any time since there is no defined contractual maturity date. Similarly, banks are typically able to adjust the interest rate attached to NMD on a unilateral basis. Despite the contractually short-term nature (using a repricing basis) of NMD, certain NMD or portions thereof may behave like longer-term, interest rate-insensitive positions. The inherent characteristics of NMD create complexities from the perspective of measuring, and in turn managing, IRRBB, meaning that a more involved approach is necessary.

Interest Rate Risk in the Banking Book (IRRBB) relates to both present and future risks to a bank’s capital and earnings arising from fluctuations in market interest rates. In recent years, IRRBB has become an area of increased focus for regulators: this has coincided with significant changes in the interest rate environment across major economies, the ending of an extended period of near-zero rates, high inflation, and industry events such as the failure of Silicon Valley Bank.

Effective 1 January 2022, the PRA implemented new requirements and expectations for banks, including creation of a regulatory limit for IRRBB and implementation of a Standardised Framework (SF) that banks may elect to follow.

On 12 December 2023, the Prudential Regulation Authority (PRA) published near-final rules on the implementation of Basel 3.1 standards through Policy Statement 17/23 (PS17/23). PS17/23 covers near-final rules on market risk; credit valuation adjustment (CVA) and counterparty credit risk (CCR); operational risk; interactions with the PRA’s Pillar 2 framework; and, re-denominate currency references to pound sterling (GBP).

The Prudential Regulation Authority (PRA) has introduced the Strong and Simple Framework for domestic banks and building societies that are non-systemic. The banks and building societies that meet the eligibility criteria are classified as Small Domestic Deposit Takers (SDDT) firms.

PRA’s Policy Statement PS15/23 (The Strong and Simple Framework: Scope Criteria, Liquidity and Disclosure Requirements) specifies the finalised SDDT criteria and prudential regulations for features (e.g., liquidity) not relating to capital requirements.

This article outlines the primary risks to banks linked to the utilisation of Deposit Aggregators (DAs) and proposes mitigating measures as outlined in the Dear CFO letter issued by the Prudential Regulation Authority (PRA) on November 15, 2023 and the Dear CEO letter in April 2021.

PS14/23 - ‘The non-performing exposures capital deduction’ eliminates the Common Equity Tier 1 (CET1) deduction requirement for non-performing exposures (NPEs) that are treated as insufficiently covered by firms’ accounting provisions.

PRA in the consultation paper CP10/23 outlines requirements around solvent exit planning and execution. This article summarises the requirements and provides specific action points that small- and medium-sized banks can consider to implement these requirements.

PRA in the supervisory statement SS1/23 outlines the key principles that banks can use to embed model risk management (MRM) within the firm. This article explores practical steps that small- and medium-sized banks can take to implement these principles on a proportional basis.

Management of liquidity risk and IRRBB in the current climate.

This article outlines reporting changes proposed as part of CP6/23 - ‘The non-performing exposures capital deduction’.

This article outlines an overview of the proposed changes, as part of UK’s implementation of Basel 3.1 (CP16/22).

This article outlines the key changes to the calculation of market risk capital requirements as part of the implementation of Basel 3.1 standards (PS17/23).

This article outlines the proposed reporting changes, as part of UK’s implementation of Basel 3.1 (CP16/22).

This article outlines the key changes to the calculation of Credit valuation adjustment and counterparty credit risk, as part of the implementation of Basel 3.1 standards (PS17/23).

This article outlines the key changes to the calculation of own funds requirement for operational risk, as part of the implementation of Basel 3.1 standards (PS17/23).

This article outlines the proposed changes to off-balance sheet items under the standardised approach of credit risk, as part of UK’s implementation of Basel 3.1 (CP16/22).

This article outlines the proposed changes to exposures in default under the standardised approach of credit risk, as part of UK’s implementation of Basel 3.1 (CP16/22).