October 2019 Regulation Update

PRA110

Treatment of Salary Related Cash Flows

In the previous month’s newsletter, reference was made to a question that had been raised by the PRA and directed to the EBA, following a query from Whistlebrook earlier this year. A request was made in late October to have an update on progress in responding to the question. Whistlebrook has had no response from either regulator.

Advice was sought on the following:

  • If a firm would be expected to populate these salary related payments into buckets such as ‘Greater than 5 years’? If population is required, how many years should be assumed and is inflation to be considered.
  • Alternatively, is it just a case of allocating the accrued expense as at the balance sheet date

The PRA responded to Whistlebrook earlier in the year, by saying that the question “…identifies a possible gap in an element of the PRA110 instructions derived from the C 66.01 (Maturity Ladder) introduced by the European Banking Authority.  We have submitted this issue for Q&A to the EBA.”

Revised Liquidity Monitoring Metric Model (LMM)

Another version of the LMM for use with PRA110 was issued in October.

PRA110 Template

WIRES® users are reminded that a new PRA110 form will be effective from 1st January 2020. The new layout includes extra rows that the regulator has added in order to get additional granularity in certain areas. The latest version of WIRES® (i.e. 5.5) has the updated form. For submissions to be made in January (i.e. report reference date after 31st December 2019), firms must use this new version.

Bank of England Form VP

In its Statistical Notice, the Bank of England has proposed that form VP (Securitisation Special Purpose Vehicles and Covered Bond Limited Liability Partnerships) be withdrawn, such that the final report reference date be 30th September 2019.

Changes to Residential Mortgages Reporting

The PRA and FCA are introducing additional reporting requirements in Product Sales Data and Mortgage Lending and Administration Return (MLAR).

Whistlebrook understands that the key changes are as follows.

Form First Report Reference Date Additional Information Required Period Covered by first submission of Additional Data
PSD001 30 June 2021 Contractual reversion rate Second calendar quarter of 2021.
Internal product transfer (‘follow on product’)
Further advances
Second charge lending
PSD007 30 June 2021 Mortgage administrators will be required to provide data on all residential mortgage books including those held by unregulated entities. First half of the calendar year 2021.
MLA G1 31 December 2020 (earliest) MLA G1 will be introduced and require the number of second charge loans administered and the total outstanding balance.

The new requirements will be applicable to regulated residential mortgage lenders, administrators and entities that own loan books but are not allowed to lend as a firm.

The revised forms will be included in WIRES® in due course.

Sources of information are policy statements 22-19 (PRA) and 19-23 (FCA).