On 7 December 2020, the PRA published Policy Statement 25/20: Simplified obligations for recovery planning (PS25/20).
PS25/20 is relevant to PRA-authorised UK banks, building societies, PRA-designated UK investment firms, and their qualifying parent undertakings to which the Recovery Plans Part of the PRA Rulebook applies. It may also be of interest to smaller and non-systemic firms that do not perform critical functions. In PS25/20 the PRA provides feedback to responses to Consultation Paper 10/20 Simplified obligations for recovery planning (CP10/20). It also contains the PRA’s final policy, in the form of an updated version of Supervisory Statement 9/17: Recovery planning (SS9/17).
In PS25/20 the PRA reports that it has considered the responses to CP10/20 and has made additional changes to SS9/17. It has updated:
- Paragraph 2.3, to make minor amendments to improve drafting and to reference the updated paragraph 2.55 below.
- Paragraph 2.4, to add further detail explaining how the PRA’s recovery planning expectations vary according to the size of firms.
- Paragraph 2.54, to make minor amendments to improve drafting.
- Paragraph 2.55, to explain that eligible firms are permitted to include a minimum of only two scenarios in their recovery plans, and that the two scenarios a firm includes should be sufficiently severe to test the recovery plan and are the most relevant to the firms’ business model. The PRA expects firms to include a combined capital and liquidity stress, as these scenarios are the most challenging.
The changes outlined in PS25/20 took effect on 7 December 2020.