On 17 October 2019, the PRA published Consultation Paper: Liquidity: The PRA’s approach to supervising liquidity and funding risks (CP27/19). In CP27/19 the PRA sets out its proposals to update its supervisory statement on supervising liquidity and finding risk (SS24/15) to:

  • reflect updates to the Bank of England’s (BoE’s) Market Operations Guide which was published in October 2019 outlining the framework for the BoE’s operations in sterling money markets and updated its sterling market framework. The PRA proposes that there should be no presumptive order in which firms should use the BoE’s liquidity facilities including the discount window facility, or draw down their own liquid asset buffers to meet a liquidity need. Firms would be expected to use their own judgment in applying for and using the BoE’s liquidity facilities; and
  • reiterate the expectations set out in its supervisory statement on recovery planning (SS9/17) that where firms view central bank liquidity facilities, including at the BoE, as part of the their liquidity risk management strategy, the PRA expects this to be included as part of the credible recovery options outlined in firms’ recovery plans.

CP27/19 is relevant to PRA-authorised UK banks, building societies, and PRA-designated UK investment firms.

The draft amendments to SS24/15 are found in the appendix to CP27/19. The PRA proposes that the amendments will apply from the date of final publication.

The deadline for comments to the consultation is 17 November 2019.