On February 23, 2018, the U.K. Prudential Regulation Authority published a Policy Statement on Pillar 2 liquidity, following two consultations in May 2016 and July 2017. The Capital Requirements Directive gives national regulators discretion to set additional Pillar 2 liquidity requirements. The Pillar 2 framework complements the Pillar 1 Liquidity Coverage Ratio requirements by capturing those liquidity risks that are either not captured or not fully captured under Pillar 1. In its May 2016 and July 2017 consultations, the PRA set out proposals for liquidity assessments, the introduction of a framework for cashflow mismatch risk (CFMR) and survival guidance on the granular liquidity coverage requirement stress within the CFMR framework.
The PRA received a number of consultation responses. The Policy Statement sets out the PRA's feedback and explanation of a number of changes it has made to its original proposals. The PRA has removed monetization in the granular LCR stress scenario on which the survival guidance was being set. It has also amended the stress uplift reference point for calculating intraday liquidity risk. In relation to CFMR, the PRA has added new timing assumptions on a number of outflows in the PRA110 reporting template and a new row in the template for the reporting of Pillar 2 add-ons. The implementation date for PRA110 reporting, which was originally scheduled for January 2019, has been delayed to July 2019.
The Policy Statement is accompanied by five separate appendices, namely, the final Statement of Policy, "Pillar 2 liquidity" (Appendix 1); updated Supervisory Statement, "The PRA's approach to supervising liquidity and funding risks" (Appendix 2); final PRA110 template and reporting instructions (Appendix 3); final PRA Rulebook instrument amending the Reporting Part of the PRA Rulebook (Appendix 4); and updated Supervisory Statement, "Guidelines for completing regulatory reports" (Appendix 5).
The updated Supervisory Statements and the Statement of Policy take effect on February 23, 2018. The PRA 110 template and reporting instructions, and the PRA Rulebook instrument, will take effect from July 1, 2019.
The Policy Statement is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/february/ps218.pdf, the Statement of Policy is available at: The Policy Statement is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/february/ps218.pdf, the Statement of Policy is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/statement-of-policy/2018/pillar-2-liquidity-sop.pdf, the updated Supervisory Statement, "The PRA's approach to supervising liquidity and funding risks" is available at: The Policy Statement is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/february/ps218.pdf, the Statement of Policy is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/statement-of-policy/2018/pillar-2-liquidity-sop.pdf, the updated Supervisory Statement, "The PRA's approach to supervising liquidity and funding risks" is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss2415update.pdf, the updated Supervisory Statement, "Guidelines for completing regulatory reports" is available at: The Policy Statement is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/february/ps218.pdf, the Statement of Policy is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/statement-of-policy/2018/pillar-2-liquidity-sop.pdf, the updated Supervisory Statement, "The PRA's approach to supervising liquidity and funding risks" is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss2415update.pdf, the updated Supervisory Statement, "Guidelines for completing regulatory reports" is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss3415update.pdf, the PRA's July 2017 consultation is available at: The Policy Statement is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/policy-statement/2018/february/ps218.pdf, the Statement of Policy is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/statement-of-policy/2018/pillar-2-liquidity-sop.pdf, the updated Supervisory Statement, "The PRA's approach to supervising liquidity and funding risks" is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss2415update.pdf, the updated Supervisory Statement, "Guidelines for completing regulatory reports" is available at: https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/supervisory-statement/2018/ss3415update.pdf, the PRA's July 2017 consultation is available at: http://finreg.shearman.com/uk-prudential-regulation-authority-publishes-seco and the PRA's May 2016 consultation is available at: http://finreg.shearman.com/uk-prudential-regulation-authority-consults-on-pi.
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