PRA writes to Treasury Committee on resourcing and CCyB increase impact

Sam Woods has written to Harriet Baldwin at the Treasury Committee in response to the Committee’s queries on resourcing of the PRA in relation to approval of firms’ IRB approaches and the impact of the increase in the countercyclical capital buffer on banks’ net lending. The letter explains that:

• PRA has set resources to support a “normal flow” of new and change requests – which has created bottlenecks recently as many firms have been seeking new IRB permissions through the modular approach and existing IRB firms are seeking to replace their models as many firms move to develop hybrid models. PRA plans to increase capacity over the next year and then thinks the pressure will ease a little as firms complete their transitions to hybrid models for mortgage books;
• BoE does not think the CCyB increase has had any material effect on banks’ net lending. Lending has increased slightly but remains low, and BoE thins this is mainly because demand has been reduced as a result of higher interest rates and uncertainty on the broader economic outlook.