Overview

This Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 3/17 ‘Refining the PRA’s Pillar 2A capital framework’. In CP3/17, the PRA made proposals in three areas:

1. adjustments to the PRA’s Pillar 2A approach for firms using the standardised approach (SA) for credit risk;

2. revisions to the PRA’s internal ratings-based (IRB) benchmark used for assessing credit risk; and

3. additional considerations the PRA will make, as part of the SREP, for SA firms using International Financial Reporting Standard (IFRS) as their accounting framework.

This PS contains the final amendment to the Reporting Pillar 2 Part of the PRA Rulebook (Appendix 1) and updates to the following supervisory statements (SS) and statement of policy:

• SS31/15 ‘The Internal Capital Adequacy Assessment Process (ICAAP) and the Supervisory Review and Evaluation Process (SREP)’ (Appendix 2);
• SS32/15 ‘Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082’ (Appendix 3); and
• Statement of Policy ‘The PRA’s methodologies for setting Pillar 2 capital’ (Appendix 4).

It is relevant to banks, building societies and PRA-designated investment firms.

Feedback on consultation responses

The PRA received 16 responses to CP3/17. Most respondents were supportive of the proposals. A number of respondents sought greater clarity on aspects of the proposals and their implementation. Specific areas where the PRA has amended or clarified the proposals are set out in the PS.