September regulation update

Leverage Ratio

In September, the Financial Policy Committee advised that it is to recommend to the PRA that there should be a minimum leverage ratio of 3.25%. No effective date was stated in the communication.

 

IFRS 9 and Transitional Arrangements

It has been widely communicated that transitional arrangements will be available for firms to apply upon the introduction of IFRS 9 provision for expected losses. This transitional arrangement is in recognition that provisions will likely be higher than under the existing standard (IAS39). Whistlebrook understands that the transitional arrangement allows firms using the standardised approach, to add back to Common Equity Tier One capital, the result of the following calculation:

 

After tax effects of IFRS 9 Stage 1 and Stage 2 expected losses

Less:

Impairment Loss Provision under IAS39 as at the day before IFRS 9 is implemented, reduced by

Stage 3 (credit impaired) expected losses as at the first day that IFRS 9 is implemented

 

The result is then multiplied by a scaler that reduces over time.

 

A simple example, would be Stage 1 and 2 after tax = 500; Provision under IAS39 25; Stage 3 on day one 16; scaler 90%;  then Add back = [500 – (25-16)]*90% = 491 * 90% = 442.

Further details can be found in a paper issued by the European Parliament on 14 July 2017.

 

IFRS 9 Transitional Arrangements and Disclosure Implications   

Where a firm chooses to apply the transitional arrangement, it will require to disclose capital and related ratio values with the transition and without it.

 

Buy to Let Data Collection

The first quarterly submission of buy to let data is required by 27th October 2017. This return is applicable to firms that have buy to let lending that exceeds £20million annually across at least 60 loans.

 

New FINREP Requirements effective from the start of a firm’s accounting year on or after 1st January 2018)

Whistlebrook understands that firms will be subject to new FINREP requirements.

 

Replacement of FSA015:

 

Assets greater than £5billion and not submitting FINREP as at the date of this e-mail:

 

Standard used for Reporting FINREP Templates (Individual and UK Consolidated)
FRS102 only 18 and 19
IFRS; FRS102 and IFRS 9 (adopted) 4.3.1, 4.4.1, 5.1, 7.1, 9.1, 12.1, 12.2, 13.1, 18, 19, 20.4, 20.7

 

 

Assets less than and equal to £5billion and not submitting FINREP as at the date of this e-mail:

 

Standard used for Reporting FINREP Templates (individual and UK Consolidated)
FRS102 only Continue with FSA015
IFRS; FRS102 and IFRS 9 (adopted) 4.3.1, 4.4.1, 5.1, 7.1, 9.1, 12.1

 

Replacement of FSA001 and FSA002:

 

Current FINREP Requirement FINREP required (Individual and UK Consolidated)
Not currently submitting 1.1, 1.2, 1.3, 2.0 and 3.0
Currently submitting No change at a group level.

1.1, 1.2, 1.3, 2.0 and 3.0