On 6 May 2022, the PRA published Policy Statement 4/22 ‘Trading activity wind-down’ (PS4/22).
In PS4/22, the PRA provides feedback to the responses to Consultation Paper 20/21 ‘Trading activity wind-down’ (CP20/21) and sets out its final policy in the form of:
- Supervisory Statement (SS) 1/22 ‘Trading activity wind-down’.
- Statement of Policy (SoP) ‘Trading activity wind-down’.
- Updated SS9/17 ‘Recovery Planning’.
In CP20/21, the PRA proposed expectations on firms to:
- Include a baseline set of factors when designing the scenario or scenarios used to develop and test the trading activity wind-down (TWD) option (referred to as the ‘TWD scenario’).
- Develop information provision and decision-making capabilities and refresh capabilities (referred to as ‘TWD capabilities’).
- Produce and maintain data of a breadth and granularity consistent with the templates set out in the appendices of the draft SS ‘Trading activity wind-down’.
Having considered the responses to the CP20/21, the PRA has made changes to the final policy to further clarify its expectations. In summary the key changes include:
- SS1/22 Chapter 4 (paragraphs 4.27, 4.39-4.40): the PRA provides further clarification on the projection of risk-based losses.
- SS1/22 Chapter 5 (paragraphs 5.1, 5.3-5.4): the PRA renames the non-mandatory templates as TWD templates, and clarifies its expectations for TWD firms that intend to adopt their own format of TWD templates.
- SS1/22 Chapter 6 (paragraph 6.8): additional details are provided for TWD firms that are part of third-country groups concerning their compliance with recovery and resolution requirements.
The PRA has also made some minor drafting amendments to SS1/22, SS9/17 and the Trading activity wind-down SoP to improve readability.
Firms will be expected to meet the expectations in SS1/22 by 3 March 2025.
PRA supervisors will engage with TWD firms throughout the period until the TWD policy expectations come into force. Supervisors will want to understand that firms are making adequate preparations significantly in advance of the implementation date and have oversight of progress to implementation. Firms should expect this dialogue to commence in H2 2022, with the exact timing to be confirmed by PRA supervisors.