Gordon McMaster Regulatory Specialist Accountant at Whistlebrook Limited explores the PRA110 Challenge.

Cash Flow Mis-match regulatory return PRA110 is effective from July 2019 and current expectations are that it will present a sizeable business challenge to prepare. It is a significant step up from the Maturity Ladder of Additional Liquidity Monitoring Metrics (ALMM) with the need for more data granularity and an increased number of business judgements.

As a result, PRA110 is likely to present a sizeable need for more data and analysis than existing regulatory returns. Quite simply, to meet the demand for increased data, firms may need to allocate more time and resource to regulatory reporting. As well as there being separate time buckets for each day within the first ninety-two days, the amount of granularity is indeed deep.  Examples include:

• A breakdown by customer type in receipt of a liquidity facility
• Expected outflows due to various levels of downgrade triggers
• Outflows on operational deposits that are protected or related to an institutional protection scheme
• Inflows that split out the interest element of contractual cash flows on loans and advances, by category of borrower
• A breakdown of initial and variation margin received / given, splitting out the amount by central clearing counterparty
• Inflows related to reverse repos covering short positions
• Maximum outflows on uncommitted liquidity and credit facilities, overdrafts, credit cards, letters of credit, etc

In addition to the above, PRA110 also introduces monetisation. Firms will be required to show the cash flows from liquidating high quality assets in a stressed environment. Also expected is the amount of liquid resources available after the monetisation actions.

Based on the above key points, acquiring that data period after period could be challenging. Stress testing to support monetisation data may also be necessary. There will be a need for a large number of judgements, for example, around expected behavioural flows and the impacts of credit downgrades.

As an established provider of regulatory reporting systems to many of the UK’s financial services providers, Whistlebrook is expanding the WIRES Regulatory Reporting System to address the complexities associated with PRA110. At its most basic level, the Whistlebrook WIRES System will provide the templates for population via Excel. At its most sophisticated, Whistlebrook offers an automated Regulatory Reporting System that covers COREP, FINREP, ALMM, FCA and BoE reporting. The automation is being enhanced to support population of PRA110.

Automation of any form is a significant benefit, but this is multiplied several times over with a template as complex as PRA110. Automated population where possible, can free up time to allocate towards areas that require judgement as well as stress testing to support data submitted.