Vida FatemiPRA has written a letter to CFOs setting out the steps firms should consider taking to mitigate risks relating to deposit aggregators that firms may have relationships with.
This follows a ‘Dear CEO’ letter in April 2021 where PRA and FCA highlighted the potential risks associated with the increasing volumes of deposits sources via DAs, and the information request sent to firms in 2022.
PRA wants to be sure the FSCS can respond effectively if a deposit taker that uses DAs fails. PRA encourages firms to take actions to mitigate risks firms may face where their deposit book relies on funding sourced via DAs in three main areas;
- Pay-out risk in relation to the FSCS, with actions including verifying ‘absolute entitlement’ for underlying beneficiaries, managing data and confirming customer checks are performed and evidenced to a sufficient standard;
- Liquidity risk, with actions including factoring in potential correlation and concentration risk, in addition to the potential speed of outflows in management of liquidity risk and funding needs; and
- Outsourcing and third-party risk management which involves managing arrangements with service providers closely and prudently, consistent with PRA expectations.