The PRA has issued a Policy Statement PS4/14: Responses to CP5/14 which sets out its response to feedback received on the proposals in its March 2014 occasional paper CP5/14. PS4/14 encompasses commentary on the following four chapters:

• chapter 1: Financial conglomerates capital adequacy. No responses were received on this consultation and the Financial Conglomerates Directive (Handbook Amendments) Instrument 2014. It came into force 26 May 2014;
• chapter 2: Proposed amendments to supervisory statement on the internal capital adequacy assessment process and the supervisory review and evaluation process (SS5/13). No responses were received on this consultation and the amended version of SS5/13. It came into force on 27 May 2014;
• chapter 3: Eligible liquid assets for Shari’ah-compliant firms. The four responses received on this consultation welcome the PRA’s proposals to allow Shari’ah-compliant firms to include a wider set of assets in their liquid assets buffers. Concerns were raised that the haircuts and limits applied on the sukuk eligible for inclusion are too restrictive. However, the PRA believes the proposals remain appropriate. The Prudential Sourcebook for Banks, Building Societies and Investment Firms (Liquidity Standards) Amendment Instrument 2014 came into force on 26 May 2014; and
• chapter 4: Risk management of asset encumbrance. The two responses received on this consultation both support the PRA’s proposals. In response to a comment made by one of the respondents, the PRA notes that it is important that a firm’s systems and controls include assets that can be freely withdrawn from encumbrance, to ensure the firm is appropriately monitoring and controlling these positions. The Prudential Sourcebook for Banks, Building Societies and Investment Firms (Liquidity Standards No 2) Amendment Instrument 2014 came into force on 26 May 2014.

Additionally, the PRA further notes that the policy on financial conglomerates capital adequacy and the amended version of SS5/13 are relevant to all PRA-authorised firms. The policy on eligible liquid assets for Shari’ah-compliant firms and the policy on risk management of asset encumbrance are relevant to those banks, building societies and designated investment firms that are subject to chapter 12 of the Prudential sourcebook for Banks, Building Societies and Investment Firms.

View Policy Statement PS4/14: Responses to CP5/14, 27 May 2014

View Responses to CP5/14 – PS4/14, 27 May 2014