Laura WilesThe PRA has published Dear CEO letters to international banks and designated investment firms, and UK deposit takers, setting out its supervision priorities for 2025.
The need for robust governance, risk management and controls remains a core issue for the PRA, which plans to focus on credit risk, where it has seen many firms falling short of the standards needed for their businesses.
On data risk, the PRA has observed poor data as a root cause in a number of risks requiring remediation within firms. It expects to rely increasingly on data tools and analytics as part of its drive for efficient supervision, and in support of this, asks firms to ensure they are submitting complete, timely and accurate regulatory returns.
On financial resilience / funding and liquidity, the PRA drew attention to its ongoing assessment of individual international banking and designated investment firms’ capital and liquidity. It expects to see firms to risk manage a range of forward-looking liquidity and capital indicators, use stress testing to assess their resilience, and have realistic and effective contingency plans.
The PRA also encourages firms to engage with the BoE’s discussion paper on transition to a demand-driven framework for supplying reserves through repo operations, which closes on 31 January 2025.
On operational resilience, the PRA reminds firms that by March 2025, they must be able to show the can remain within impact tolerances for all their important business services throughout severe but plausible disruptions. It expects firms to have made significant progress to strengthen response and recovery capabilities on cyber threats, remediate vulnerabilities exposed by legacy infrastructure, and develop contingency procedures to be deployed during disruptions in material third party services.
The PRA also highlighted its recent announcement, in consultation with HM Treasury, that the implementation of Basel 3.1 in the UK would be delayed by 12 months to 1 January 2027. It will be considering the impact of this delay on the timeframe for implementing the Strong and Simple framework.