On 11 August 2020, the PRA published a letter (dated 31 July 2020) from Mel Beaman, Director UK deposit takers, PRA to CEOs of non-systemic building societies. The letter was in response to a Building Societies Association suggestion proposing a six-month suspension of the relevant guidance levels on fixed rate lending limits in the Building Societies sourcebook. The PRA explains that the sourcebook is guidance (not rules) designed to achieve alignment between risk appetite and risk capability.
In the letter the PRA agrees to suspend the relevant guidance levels on fixed rate lending limits in the sourcebook for an initial period of six months, starting from 1 August 2020 to 31 January 2021. The only proviso is that there is a limit set by the PRA to any self-administered extension to 10% above the lower of the Sourcebook benchmark or the building society’s current limit, and the PRA still expects boards to undertake the appropriate risk assessment before undertaking any such change. Building societies are also asked to inform the PRA (after the event) of any changes made in this respect, together with sight of the relevant board minutes.
The PRA will review this COVID-19-related dispensation before 31 January 2021.