PRA consults on CRD V

PRA is consulting on changes to its rules, supervisory statements and statements of policy needed to implement parts of CRD V.  This consultation is the first part of PRA’s preparation for implementation, and it intends to consult on other element of the package in the autumn – specifically those that need legislative change and the amendments to the CRR that apply from 28 December.

The consultation, as promised, relates only to those rules that firms must comply with before the end of the Transition period and covers:

  • Pillar 2, and the required changes to the SREP in terms of proportionality and AML/TF. PRA does not think it needs to make any changes to implement the CRD V requirements on quality of capital, but does need to make some adjustments to the PRA buffer in respect of subsidiaries of UK consolidation groups or RFB sub-groups;
  • remuneration, including lengthening the minimum deferral period for remuneration from 3 to 4 years for MRTs not already subject to longer periods. It will also clarify that certain requirements do not apply to individuals with annual variable remuneration of less than €50,000 which is no more than one-third of total remuneration (rather than the current £500,000);
  • intermediate parent undertakings – PRA asks what the costs would be for a non-EU group subject to its proposed rules, for establishing an IPU;
  • governance – the required changes will include changes to outsourcing rules, loans to board members and verification of fitness and propriety; and
  • third-country branch reporting.

The rules will apply from 29 December until, technically, the end of the transition period (ie, for three days), but PRA intends to continue the application of most of the changes post-transition. PRA seeks comments by 30 September.

Emma Radmore