On 7 July 2020, the PRA issued a statement referring to the letter from Sam Woods concerning the prudential regulatory framework and Libor transition.

In the statement the PRA states that it considers that, where the sole purpose of an amendment to a liability (as defined in the Contractual Recognition of Bail-In Part of the PRA Rulebook (CROB Part)) or a financial arrangement (as defined in Stay in Resolution Part of the PRA Rulebook (Stays Part) is to transition away from Libor, the amendment should not be considered a material amendment as the term applies to either the CROB Part or the Stays Part.

However, the PRA adds that nonetheless firms should consider adding CROB and Stays terms into the documentation for a third-country law governed liability or financial arrangement that is amended for the sole purpose of transitioning away from Libor, as it enhances firm resolvability.

The PRA also states that consistent with paragraph 5.10 of the Bank of England’s minimum requirements for own funds and eligible liabilities (MREL) Statement of Policy, firms should consider whether having non-Common Equity Tier 1 (CET1) own funds instruments governed by third-country law but without statutory or contractual recognition of UK bail-in rules would create difficulties for resolution. The Bank of England could determine that it needs to use its powers under section 3A of the Banking Act 2009 to direct relevant persons to address impediments to resolution, in particular through a direction, to endeavour to renegotiate instruments under section 3A (4–5).