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PRA consultation CP 20-19 regulatory capital instruments update

PRA consultation CP 20/19: regulatory capital instruments update for PIN requirements

Background

  • CP 20/19: Regulatory capital instruments: update to Pre-Issuance Notification (PIN) requirements; published by the PRA on 9 September 2019
  • This Consultation Paper is relevant to firms impacted by the Capital Requirements Regulation.
  • In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposals for amendments to the Pre-Issuance Notification (PIN) regime applicable to PRA-authorised Capital Requirements Regulation (575/2013) (CRR) firms. Appendix 1 contains the proposed amendments to the PIN regime as set out in the Definition of Capital Part of the PRA Rulebook.
  • The PRA also sets out a number of proposals to make the PIN regime for CRR firms more risk-sensitive and proportionate, and to allow firms greater flexibility in issuing capital instruments.

Impacts

The PRA’s Supervisory Statement (SS) 7/13 ‘CRD IV and capital’ sets out the PRA’s expectations of CRR firms in relation to their quality of capital resources. The PRA proposes to update SS7/13 to emphasise the PRA’s preference for simpler CET1 capital structures and set out its proposed expectations of firms’ senior management in relation to the quality of capital resources.

The PRA also proposes to clarify two terms introduced by CRR II, to ensure common understanding of notification requirements in relation to subsequent issuances of CET1 and AT1 capital instruments. Appendix 2 contains the proposed revisions to SS7/13 which is proposed to be renamed ‘Definition of Capital’.

The proposals set out in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA has assessed that the proposals will not be affected in the event that the UK leaves the EU with no implementation period in place.

Timeline with relevant dates to be logged on regulatory calendar

  • PRA Consultation opens on 9 September 2019
  • PRA Consultation closes on 9 December 2019
  • Proposed implementation date is 1 April 2020

Next steps

Any respondents need to send comments to the PRA.

The proposed implementation date for the proposals in this CP is Wednesday 1 April 2020