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’.

PRA consultation paper CP5/22 proposes an introduction of a simpler regime and simplified prudential requirements for non-systemic banks and building society. In CP5/22, the PRA have proposed a definition for ‘Simpler-regime Firm’ (SRF).

Katalysys is delighted to announce that we have achieved ISO 9001:2015 (ISO 9001) and BS EN ISO/IEC 27001:2017 (ISO 27001) certification, after a successful audit conducted by external auditors accredited to UKAS (the sole national accreditation body recognised by UK Government).

The PRA set out its approach to its new objective in the DP, stating that it intends to centre its attention on facilitating economic activity in the medium- to long-term, and steer clear of activities that might create short-term economic booms at the cost of long-term stability and economic resilience.

The Pillar 3 disclosure requirements are now more proportional based on the risk and size of the bank. There is now a requirement to complete a number of prescribed templates as part of the disclosure as well. These changes comes into effect from 1 January 2022.

PRA consultation paper CP5/22 proposes an introduction of a simpler regime and simplified prudential requirements for non-systemic banks and building society. In CP5/22, the PRA have proposed a definition for ‘Simpler-regime Firm’ (SRF).

Funds Transfer Pricing (FTP) plays a crucial part of the process of setting both retail and commercial interest rates. This Insight provides a brief overview of the overall FTP process and how Katalysys can help small- and medium-sized banks implement such a process.

A common question we are asked is the basis on which own funds requirement has to be calculated for the various types of exposures on the non-trading and trading book.

The approach to evaluating risk weight for Collective Investment Undertaking (CIU) exposures has changed under the new CRR2 rules. There are three approaches outlined, and banks can select the specific approach based on the amount of information available about the underlying exposures of the CIUs.

The UK has existed the EU on 31 January 2020 and currently in the transition phase until 31 December 2020. The BoE and PRA have published a number of guidance around regulatory requirements during the transition phase and on existing the transition phase.

Prudently valued software assets no longer needs to be deducted from CET-1 capital, but can be risk weighted.

The large exposure limits are set based on the bank’s Tier-1 Capital Only.