The PRA has published Policy Statement 30/17: Pillar 2A capital requirements and disclosure (PS30/17). In PS30/17 the PRA provides feedback on Consultation Paper 12/17: Pillar 2A requirements and disclosure (CP12/17) and sets out final amendments to Supervisory Statement 31/15: The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SS31/15) (Appendix 1), and Statement of Policy, The PRA’s methodologies for setting Pillar 2 capital (Appendix 2), intended to provide additional clarity and transparency on the PRA’s Pillar 2A framework.
In CP12/17 the PRA proposed 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;
- update existing capital terminology, in particular to introduce the term ‘Total Capital Requirement’ (TCR) to refer to the amount and quality of capital a firm must maintain to comply with the minimum capital requirements under the Capital Requirements Regulation (Pillar 1) and the Pillar 2A capital requirement;
- revise the PRA’s Pillar 2A disclosure policy, introducing an expectation that firms disclose their TCR or, where a Pillar 2A capital requirement has not yet been set, total Pillar 1 and Pillar 2A guidance; and
- provide clarity on when and how individual Pillar 2A capital requirements may be set.
Following the feedback on CP12/17, the PRA has made a minor change to the draft of the updated SS31/15. The change relates to the TCR disclosure expectation for sub-consolidated ring-fenced bodies. Specifically, the change clarifies that the disclosure expectation for ring-fenced bodies applies only at the sub-consolidated group level, where one has been set up, and not at subsidiary or individual (solo) level. Further adjustments to SS31/15 and the Statement of Policy have been made to reflect the change of terminology from individual capital guidance to TCR, and minor linguistic corrections.
No material changes have been made to the draft Statement of Policy that the PRA set out in CP12/17.
The PRA’s disclosure expectations will apply from 1 January 2018. The PRA will individually apply Pillar 2A capital requirements to firms in line with scheduled capital reviews. The PRA expects firms to continue to abide by their individual capital guidance until such a time as it is formally replaced with a total capital requirement following a supervisory capital review. The PRA is aware it has used the term individual capital guidance in other public documents beyond SS31/15 and the Statement of Policy. The PRA will amend the terminology within affected documents over time, as and when these are updated or consulted on for other changes.
View Pillar 2A capital requirements and disclosure, 12 December 2017