Banking and finance regulatory news, 25 January 2021

FIG Bulletin

Recent regulatory developments focussing on banking and finance. See also developments of broader scope in our Related Materials links.


Depositor protection identity verification: PRA CP3/21

The UK Prudential Regulation Authority (PRA) has published a consultation paper, CP3/21, on depositor protection identity verification.

In CP3/21, the PRA sets out proposed rules on the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS). It also proposes amendments to its expectations set out in Supervisory Statement (SS) 18/15, Depositor and dormant account protection, including a new expectation that insolvency practitioners (IPs) should carry out identity verification checks in the event that a firm has failed to do so by the compensation date.

The PRA proposes that the implementation date for the changes would be 24 March 2021.

The consultation closes on 17 February 2021.

BoE 2021 stress test

The Bank of England (BoE) has published a new webpage on the key elements of the 2021 stress test. The 2021 solvency stress test will assess the major UK banks and building societies against a UK and global scenario that reflects a severe path for the current macro-economic outlook. The aim of the 2021 solvency stress test will be to update and refine the FPC's assessment conducted in August 2020 based on an analysis in a "reverse stress test" exercise. It will cover a five-year horizon and, unless otherwise agreed, the reference date will be 31 December 2020.

The PRA has also published a webpage, together with a document setting out variable paths, providing guidance on the 2021 stress test for participants conducting their own analysis. The templates used for collecting data have been provided to participating banks.

The timetable for the 2021 solvency stress test will be staggered. Participating banks will submit projections for credit impairments and credit risk-weighted assets in April, rather than June. The additional stressed projections will be submitted in June, with bank-specific results published in Q4 2021. To help facilitate the changes to the usual timetable, and in recognition of ongoing operational challenges within participating banks, banks will not be requested to submit baseline projections and the ring-fenced subgroups of stress-test participants will not be included in the 2021 test. In addition, although the qualitative review will continue to be an important component of the 2021 stress test, the scope of the 2021 exercise will be adapted accordingly.

SRM: European Court of Auditors report on resolution planning

The European Court of Auditors (ECA) has published a report about resolution planning in the Single Resolution Mechanism (SRM). The ECA's overall conclusion is that the SRM has made progress over the last years, but some key elements are missing and further steps are needed in resolution planning for banks.

The ECA's recommendations include that the SRB:

  • improves its set of policies that guide the SRM's resolution planning;
  • ensures timely adoption and full compliance of resolution plans with legal requirements;
  • improves the organisational set-up of the SRM; and
  • together with the European Commission, invites the legislators to set up objective and quantified criteria for timely supervisory action.

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Authored by Yvonne Clapham


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