The PRA has updated its Capital Requirements Directive IV (CRD IV) webpage to provide information on Pillar 2 voluntary requirements (VREQ) applications.
In the PRA’s Supervisory Statement 31/15: The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP) (SS31/15), the PRA stated that it expects firms not to meet their CRD IV buffers with any Common Equity Tier 1 (CET1) capital maintained to meet their Individual Capital Guidance (ICG). A firm’s ICG will normally be set following the SREP, including both a review of the ICAAP and any further interactions with the firm.
If a firm agrees with its ICG the PRA will expect it to apply for a VREQ under section 55M of the Financial Services and Markets Act 2000 (FSMA), preventing the firm from meeting its CRD IV buffers with CET1 capital maintained to meet its ICG. If a firm does not apply for such a requirement the PRA will consider using its powers under section 55M(3) FSMA to impose one of its own initiative.
The PRA has now confirmed that it will be sending firms the relevant VREQ application forms, which are expected to be signed and returned.
View CRD IV updates, 18 September 2015