Laura WilesAfter publishing a near-final policy statement on various chapters in its consultation on the implementation of the Basel 3.1 standards late in 2023, PRA has published a second near-final policy statement in response to the remaining chapters in CP 16/22.
The PRA has made a several amendments to the draft policy in CP 16/22, the most material of which are:
- Amendments to the treatment of SME lending to reduce the operational burden for firms and lower capital requirements;
- Amendments to the treatment of infrastructure lending to lower capital requirements;
- Lower, more risk-sensitive conversion factors for off-balance sheet items to better reflect empirical data provided by respondents;
- A more risk-sensitive and operationally simpler approach to the valuation of residential real estate under the credit risk standardised approach; and
- An approach to calculating the output floor which enhances consistency between standardised approaches and the output floor.
The consultation was published alongside four further consultations, concerning restatement of CRR requirements, streamlining the Pillar 2A framework and capital communications process, updating the UK policy framework for capital buffers, and a simplified capital regime for SDDTs.
The PRA has not made final rule instruments at this stage as HMT must first revoke the relevant parts of the Capital Requirements Regulation by way of commencement regulations. Once the commencement regulations have been made, the PRA intends to make all final policy materials, rules, and technical standards in a single final policy statement.