Posted on: March 21, 2023

Non-performing Exposures Capital Deduction

The Prudential Regulation Authority (PRA) issued its consultation paper 6-23 and described its proposal to remove the need for the Prudential Backstop. It is expected that from Q4 2023, firms that submit COREP will not be required to deduct from Common Equity Tier 1 capital, insufficient provision and write offs on non-performing exposures. There will be no need to submit COREP templates C 35.1, 35.2 and 35.3.

The Prudential Backstop was introduced on 1st January 2022 and is relevant to exposures that were effective on or after 26th April 2019. Also, any exposures present prior to that date and have been subject to a fundamental change, resulting in an increased amount, are caught by the Backstop. Of those exposures described that are unsecured and have been non-performing for two years are actually subject to the backstop. For secured exposures, the time of non-performance is three years.

Economic Crime Levy

The Financial Conduct Authority is introducing a new levy that FCA registered firms will be required to pay. Linked to that is the need for these firms to submit their total UK Revenue in the previous tax year. The FCA has issued template FIN074 that institutions affected by the regulation, can use to provide the necessary information. Given that only one number is to be submitted, an easier alternative is to log into RegData and enter the value therein. The requirement to submit the data will be on a firm’s schedule.

Basel 3.1

Whistlebrook understands that a new taxonomy will be provided for Basel 3.1 reporting. The taxonomy is to include the proposed change for the removal of the Prudential Backstop (described above). It is currently unclear when this new taxonomy will be made available by the regulator. Whistlebrook has communicated the urgency with which the taxonomy is required, in order that its clients can appropriately prepare for Basel 3.1 implementation on 1st January 2025.

Regulatory Reporting Template Changes

  • Templates for LREQ firms to submit the Contingent Leverage Ratio data are being introduced and will have a first report reference date of 31st December 2023. Further details are in PRA consultation paper 12-22.
  • In Q3 of 2023, a consultation paper is expected and is likely to detail slight amendments to reporting of Liquidity Coverage and Net Stable Funding.
  • There is also the possibility that template PRA110 Cash Flow Mismatch will be subject to change. A consultation is expected later in 2023.

Table for WIRES® Releases

Please note the estimated time shown below is subject to change, in accordance with regulatory requirements that may alter.

 

Time of Release Reason for Release
June 2023 ·         Enhancements and any fixes

 
September 2023 ·         Basel 3.1 (subject to provision of the taxonomy)

·         Strong & Simple Framework (dependent on published requirements)

·         Addition of new Contingent Leverage Ratio templates for ‘LREQ’ firms

·         Bank of England taxonomy 1.3.0 for Issuing Paying Agents (IPA) form

·         Enhancements and any fixes

 

This regulatory update is Whistlebrook’s understanding of the position as at 21st March 2023.