The PRA has published an updated version of Supervisory Statement 20/15:Supervising building societies’ treasury and lending activities (SS20/15).
SS20/15 sets out the PRA’s approach to its supervision of building societies’ lending and treasury activities. SS20/15 aims to build on the principle that the risk appetites of building societies should be properly aligned to their risk capacity, in order to promote the safety and soundness of building societies as deposit-taking institutions. SS20/15 describes the key lending and treasury risks to which building societies are exposed, and sets out a framework explaining the different potential models for managing and controlling these risks. The three approaches for lending are, ‘traditional’, ‘limited’ and ‘mitigated’. The four approaches for treasury are ‘administered’, ‘matched’, ‘extended’ and ‘comprehensive’.
The PRA has updated SS20/15 so that it could provide additional clarification and corrections following its original publication.
The PRA expects each building society to adopt the approaches (lending and treasury) that are most appropriate to its business model and risk management capabilities, recognising that the small scale of some building societies may preclude having a separate risk management function and therefore limit the types of activities that they can undertake prudently.
View Supervising building societies’ treasury and lending activities – SS20/15 Update, 23 January 2017