- Collections function: PRA Dear Chief Risk Officer letter
- Future regulation of building societies: PRA speech
- Access to cash: FCA and PSR statement
- Access to cash: HM Treasury speech
- Cessation of GBP LIBOR ICE Swap Rate: IBA consultation
- EURIBOR fallbacks: Working Group on Euro Risk-Free Rates recommendations
- Liquidity and funding in resolution: SRB guidance
- Disclosure and reporting of MREL and TLAC: Commission Implementing Regulation on ITS
- Review of NPL transaction data templates: EBA discussion paper
- Financial inclusion and financial health target setting for banks: UNEP FI guidance
Collections function: PRA Dear Chief Risk Officer letter
The UK Prudential Regulation Authority (PRA) has published a letter to Chief Risk Officers (CROs) of non-systemic UK deposit takers, from Melanie Beaman, PRA Director, UK Deposit Takers, which summarises the PRA's findings following an internal audit review of collections functions.
The PRA asked, in November 2019, the Internal Audit function (IA) of a sample of non-systemic banks and building societies to undertake a review of the Collections function to provide assurance to their boards and to the PRA over the effectiveness of controls in three specific areas of interest:
- collection processes and control environment;
- governance and oversight; and
- regulatory reporting.
The PRA's main observations are set out briefly in the letter and Annex 1 contains more details against the specific areas of interest.
The PRA is assured from the IA findings that the processes and controls in place for collection operations, from a prudential perspective, are largely adequate and effective across the majority of firms. However, its observations reinforce the need for some firms to continue to enhance their collections operations and develop the right level of control and governance to ensure its effectiveness. Also, some firms need to review the adequacy of resources, more efficiently manage the processes and ensure adequate oversight at board level.
The PRA is aware that collection controls and processes are under review for many firms, in particular in the light of the increase in collections activity due to the COVID-19 pandemic. It states that firms should find the letter a helpful reference when considering their collection operations and potential areas that might need strengthening.
The PRA intends to continue to monitor firms' Collections functions in the light of the impact of the COVID-19 pandemic on arrears and forbearance levels.
Future regulation of building societies: PRA speech
The Bank of England (BoE) has published a speech given by Sam Woods, BoE Deputy Governor for Prudential Regulation and PRA CEO, on current PRA initiatives relating to the regulation of building societies. Mr Woods sets out how the PRA plans to regulate building societies in the future. He explains the PRA's proposals for a new "strong and simple" regime for small building societies. Then he covers the link between two ongoing reviews that are relevant for large building societies. The first is the review of the leverage ratio. The second is the review of minimum requirements for own funds and eligible liabilities (MRELs). Mr Woods also considers mortgage risk-weights. He concludes by saying that the PRA is moving into a new phase of making regulatory rules now the UK has left the EU. It will mean even more opportunities for engagement with stakeholders on key issues.
Access to cash: FCA and PSR statement
The UK Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) have published a statement providing an update on their joint approach on access to cash. The regulators are committed to ensuring that cash, and the infrastructure that supports it, remains available for those who need it. They state that this challenge requires industry, government and regulators to act.
The FCA and PSR are monitoring trends and supervising firms to make sure access is available and will use the tools at their disposal to ensure this happens. They welcome industry's proposals to work together and develop solutions while ensuring they comply with competition law.
The regulators expect individual firms play their part in protecting the ability of customers to access cash and wider banking services in ways that meet their needs, particularly vulnerable customers and SMEs. Individual firms are responsible for making sure that when they close a branch or ATM in a local area, there are alternatives available to provide services at a standard of service that meets the needs of the customers using that branch or ATM. Firms will need to consider the ability to withdraw and deposit cash, safety, accessibility and opening times.
To meet their responsibilities, over the short term firms are likely to rely on the current alternatives to branches to a large extent, such as Post Office and LINK services. The regulators believe there can be significant benefits from making the most of, and where necessary enhancing, the existing services and policies. Over the longer term there will be further scope for firms to use other alternatives and innovations.
Following on from the regulators' work with the University of Bristol on assessing cash access across the UK in 2020, they intend to publish an updated assessment of the UK's cash infrastructure in summer 2021, alongside the FCA's recent consumer research into cash use. In addition, the PSR will shortly publish its review of specific direction 8 (SD8), which relates to free-to-use ATMs.
The FCA has also published a speech by Sheldon Mills, FCA Executive Director, Consumers and Competition, on protecting access to cash and banking services.
Access to cash: HM Treasury speech
HM Treasury has published a speech by John Glen, Economic Secretary to HM Treasury, on the government's commitment to protect access to cash. Among other things, in the speech, Mr Glen announces that HM Treasury will launch a consultation on legislative proposals to protect access to cash in summer 2021.
Cessation of GBP LIBOR ICE Swap Rate: IBA consultation
ICE Benchmark Administration has published a consultation on its intention to cease the publication of GBP LIBOR ICE Swap Rate settings for all tenors immediately after publication on 31 December 2021. It stresses that the consultation is not an announcement that it will either cease or continue the publication of GBP LIBOR ICE Swap Rate after December 2021.
The consultation closes on 4 June 2021. IBA expects to consult on the potential cessation of USD LIBOR ICE Swap Rate in due course.
EURIBOR fallbacks: Working Group on Euro Risk-Free Rates recommendations
Following its earlier consultation, the Working Group on Euro Risk-Free Rates has published recommendations on EURIBOR fallbacks, covering events that could trigger fallbacks in EURIBOR-linked contracts and the rates that could be used if a fallback is triggered. The recommendations include an €STR-based EURIBOR fallback rate for specific use cases, including corporate lending, debt securities, securitisations and trade finance and
There is currently no plan to discontinue EURIBOR, but the Working Group considers that the development of more robust fallback language addresses the risk of a potential permanent discontinuation, enhances legal certainty and is in line with the EU Benchmarks Regulation.
Liquidity and funding in resolution: SRB guidance
The Single Resolution Board (SRB) has published operational guidance for 2021 on liquidity and funding in resolution. The guidance focuses on the estimation of liquidity needs and aims to enhance banks' resolvability and preparedness for a potential resolution. Banks will be assessed on this element in the 2021 resolution planning cycle and are invited to leverage on any capability already developed for supervisory purposes (for example, recovery planning).
Disclosure and reporting of MREL and TLAC: Commission Implementing Regulation on ITS
Commission Implementing Regulation (EU) 2021/763, which contains implementing technical standards (ITS) on disclosure and reporting of the minimum requirement for own funds and eligible liabilities (MREL) and the total loss absorbency requirement (TLAC), has been published in the Official Journal of the European Union. The ITS reflect a mandate set out in Articles 430(7) and 434a of the Capital Requirements Regulation (CRR), as amended by CRR II, and Articles 45i(5) and (6) of the Bank Recovery and Resolution Directive (BRRD), as amended by BRRD II.
The Implementing Regulation enters into force on 1 June 2021. Different application dates apply for the supervisory reporting and public disclosure requirements:
- the supervisory reporting requirements will apply from 28 June 2021; and
- the public disclosure requirements will apply from 1 June 2021 in respect of disclosures made in accordance with Article 437a and point (h) of Article 447(h) of the CRR (that is, disclosures relating to TLAC). They will apply from 1 January 2024 (or from any later compliance deadline set by the applicable resolution authority) in respect of disclosures made in accordance with Article 45i(3) of the BRRD.
Review of NPL transaction data templates: EBA discussion paper
The European Banking Authority (EBA) has published a discussion paper on a review of its standardised data templates for non-performing loan (NPL) transactions.
The EBA's NPL transaction data templates, which were originally published in December 2017, are intended to support NPL transactions and enhance the functioning of the secondary markets in the EU. In December 2020, in its COVID-19 action plan on NPLs, the European Commission stated that the templates were not yet widely used by market participants due to their voluntary nature and complexity, and invited the EBA to conduct a review of the templates in 2021.
In the discussion paper, the EBA sets out its proposals. It has published Annex I and Annex III to the discussion paper separately. Annexes II and IV are set out in the discussion paper itself.
The consultation ends on 31 August 2021. By December 2021, the EBA will publish a revised version of the templates based on feedback to the discussion paper.
The EBA also states that it will await the final version of the proposed Directive on credit servicers and credit purchasers. If this Directive mandates the EBA to develop implementing technical standards (ITS) specifying data templates for the provision of information from NPL sellers to purchasers, the EBA will publish a consultation paper on the draft ITS, based on the revised templates developed following the discussion paper.
Financial inclusion and financial health target setting for banks: UNEP FI guidance
The United Nations Environment Programme Finance Initiative (UNEP FI) has published guidance on financial inclusion and financial health target setting for banks. The guidance supports signatory banks in their efforts to set targets for financial inclusion and financial health, in line with the requirements of the UNEP FI Principles for Responsible Banking. It outlines the key steps for setting targets to drive increasing economic and social inclusion and provides two illustrative examples of how banks can set targets in financial inclusion and financial health.
Using the guidance, banks can understand how to align their core business with the sustainable development goals (SDGs), including SDG 1 (No poverty), SDG 5 (Gender equality), SDG 8 (Decent work and economic growth), SDG 9 (Industry, innovation and infrastructure), SDG 10 (Reduced inequalities) and SDG 17 (Partnerships for the goals).
The guidance has been developed by parties including a working group of banking signatories to the Principles for Responsible Banking and the UNEP FI secretariat.