Reporting to BEEDS

Clients are reminded that Leverage Ratio reporting as part of COREP, should be completed on the UK LV templates. Submission is to BEEDS. This change to BEEDS and to use these UK templates, was effective from 31^st March 2022.

Associated with BEEDS, the Bank of England issued a communication in July, that highlighted the need for firms to submit Statistical returns in units.

Financial Services and Markets Bill

This Bill was published on 20 July 2022. Whistlebrook understands that as part of this Bill, with Parliament for review, there is a proposed framework for overseeing the resilience of critical third party providers of services to the Financial Sector. The Financial Conduct Authority’s discussion paper 22-3 provides further details on this proposed regulatory framework.

It is also understood that this Bill will introduce a power for the Government to “call in” regulatory decisions of the Bank of England.

Data Collection Transformation

The Prudential Regulation Authority provided an update on the progress in the data collection transformation project.

Of interest, but perhaps not surprising, were the following recommendations made by the Transformation Committee, after analysis of test cases.

• Instructions for reporting should be overhauled so that they clearly define each item of data required to give a standardised meaning. This change ought to be extended to all the Bank of England Statistical reporting requirements.
• Links from instructions to relevant information on the handbook, be available
• A live help function (understood to be around the instructions) be provided
• Centralisation of regulatory templates, instructions, XBRL, etc. on the website
• Standardised datasets should be developed and enable data to be extracted using procedures in the form of code

UK Countercyclical Capital Buffer

For exposures to UK counterparties, the buffer will be increased from

• 0% to 1% from 13 December 2022
• 1% to 2% from 5 July 2023

COREP Market Risk Reporting

The two new COREP market risk templates (C 90 and C 91) that were due to be effective from 1 January 2023, will be implemented with Basel 3.1. That timing is according to paragraph 14.22 of PRA policy statement 17-21. Based on the template format and layout, both will be available in Wires, ahead of the first report reference date.

Cryptoassets

According to the PRA’s business plan, the following is expected by the end of 2023.

• Firms will be asked to report on their cryptoasset exposures and related investment plans
• The PRA will engage with the Basel Committee on the development of a common international framework for regulation of cryptoassets

In June 2022, the Basel Committee issued a second consultation paper in respect of cryptoasset exposures. According to this paper, the proposed full deduction of exposures from Common Equity Tier 1 capital, has been dropped. Of the four categories of cryptoasset, only those described as ‘tokenised traditional assets’ (Group 1a), can be considered for inclusion in a firm’s liquidity buffer. Clearly, firms will require to give serious consideration to their approach towards cryptoasset exposures.

Climate Change

The Bank of England is to review whether changes to capital buffers may be necessary because of the effects of climate change. The outcome will be issued at the end of 2022.

UK Resolvability Framework

The volume of transaction accounts is a factor in determining which resolution method would be applied by the regulator. A change to the transaction level thresholds, may be announced by the Bank of England towards the end of 2022. Whistlebrook understands that any firm impacted by the change, would be contacted directly by the Bank of England.

UK Leverage Ratio Framework

There are revisions to this regulation, with effect from 1 January 2023.

• The threshold to determine if a firm is subject to the framework is being extended to include those with non-UK assets of £10billion or more (averaged over the 3 accounting year ends prior to 1 Jan 2023).
• Reporting by all LREQ firms will require daily averages on securities financing transaction exposures
• The framework will be extended to individual firms that are not Capital Requirements Regulation consolidation entities or the parent of a ring fenced bank sub group.

Whistlebrook understands that LREQ firms are those subject to the framework as a result of exceeding the non-UK asset limit of £10bn or having UK retail deposits of at least £50bn.

This regulatory update is Whistlebrook’s understanding of the position as at 26th July 2022.