On 20 October 2020, the PRA published Consultation Paper 17/20: Capital Requirements Directive V (CRD V): Further implementation (CP17/20).

In CP17/20 the PRA sets out proposed changes to its rules, supervisory statements (SS) and statements of policy (SoP) to implement elements of the Capital Requirements Directive V (CRD V). It also proposes to update aspects of the UK regulatory framework as a result of amendments to the Capital Requirements Regulation (CRR, as amended in CRR II), which apply during the European Union (EU) exit transition period (transition period).

CP17/20 is relevant to banks, building societies, PRA-designated investment firms, UK financial holding companies, and UK mixed financial holding companies of certain PRA-authorised firms.

CP17/20 should be read in conjunction with CP12/20, which set out the PRA’s proposed approach to implementing other elements of CRD V, and HM Treasury’s (HMT) approach to implementing aspects of CRD V and CRR II that require legislative changes in order to implement them in the UK. HMT’s approach is being legislated for through The Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020.

The CRD V measures covered by this CP include:

  • A new requirement for the approval and supervision of certain holding companies.
  • Measures to enhance supervisory requirements to measure, monitor, and control interest rate risk in the banking book.
  • Measures revising the framework for applying capital buffers.
  • Amendments to the definition of the maximum distributable amount that constrains a firm’s distributions when it uses its capital buffers
  • Clarifying the quality of capital required to meet Pillar 2 requirements.

The CRR measures covered comprise adjustments to:

  • The process through which variable capital requirements may be applied to firms’ real estate exposures (and the public authority responsible for applying it).
  • The methods that may be used for the purposes of prudential consolidation.

The deadline for comments on CP17/20 is 17 November 2020.