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PRA consults on implementation of CRD IV

In this consultation the Prudential Regulation Authority (PRA) sets out the proposed changes to its rules to implement CRD IV.  Proposed supervisory statements are made giving more information on the PRA’s approach to certain CRD IV provisions.  All banks, building societies and PRA designated investment firms are affected by these proposals.  The Capital Requirements Regulation (CRR) is directly binding on firms subject to permitted competent authority discretions and the Capital
Requirements Directive (CRD) must be transposed into the PRA Handbook. 

The consultation seeks views on:

  • how the PRA is planning to operate discretions and derogations provided under the CRR;
  • how the PRA is planning to operate the transitional provisions provided under CRD and CRR;
  • how the PRA is intending to transpose the obligations in CRD into rules;
  • the content of the draft Supervisory Statements;
  • the deletion or disapplication of existing PRA rules as part of CRD IV implementation; and specific questions set out in individual chapters of the CP regarding proposals on pillar 2, credit risk, market risk and Large Exposures.

The PRA’s consultation paper sets out the detail of these changes and the
transitional periods for firms to allow them to prepare for the new regime.  The approach to the reporting requirements are set out at page 40.

The PRA is also making enhancements to the quality of capital held against “Pillar
2” which encompasses firms’ internal capital assessment and the supervisory
review of those assessments. Pillar 2 is intended to ensure that firms have
adequate capital to support all the relevant risks in their business and is
divided into capital held against risks not captured or not fully captured by
the regulations (Pillar 2A) and risks to which a firm may become exposed over a
forward-looking planning horizon (Pillar 2B). In addition to the Pillar 1 requirements,
the PRA regards Pillar 2A capital as the minimum level of capital firms should

Feedback is requested by 2 October.  The PRA will then publish a policy statement with feedback, finalised rules and final supervisory statements in December 2013.

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