The PRA has published Consultation Paper 12/17: Pillar 2A capital requirements and disclosure (CP12/17). CP12/17 is relevant to all banks, building societies and PRA-designated investment firms.

In CP12/17 the PRA sets out proposed adjustments to its Pillar 2A capital framework. Proposed amendments are set out which change Supervisory Statement 31/15: The Internal Capital Adequacy Assessment Process and the Supervisory Review and Evaluation Process and the Statement of Policy: The PRA’s methodologies for setting Pillar 2 capital. In particular, the PRA proposes to set Pillar 2A capital as a firm-specific capital requirement under section 55M of the Financial Services and Markets Act 2000, rather than as individual guidance. Consistent with the PRA’s current policy, under the proposals, the requirement would be set at the level and quality of capital the PRA considers a firm should maintain, in addition to Pillar 1, to meet the overall financial adequacy rule.

The PRA also intends to update some of the existing capital terminology. The term ‘Total Capital Requirement’ (TCR) is introduced to refer to the amount and quality of capital a firm must maintain to comply with the Capital Requirements Regulation (Pillar 1) and the Pillar 2A capital requirement. The term ‘Individual Capital Guidance’ will be discontinued.

The PRA also proposes:

  • a revised disclosure policy in which the PRA expects firms to disclose their TCR or, where a Pillar 2A capital requirement has not yet been set, total Pillar 1 and Pillar 2A guidance; and
  • to provide clarity on when and how individual (solo) Pillar 2 capital requirements may be set.

The deadline for comments on CP12/17 is 12 October 2017.

View Pillar 2A capital requirements and disclosure – CP12/17, 12 July 2017