The PRA is consulting on changing its liquidity requirements so that banks will be able to monetise liquid assets quickly if needed in response to a fast-paced stress event. It uses as an example the Silicon Valley Bank collapse. The PRA proposes to:
- require firms to evaluate their liquidity, identify barriers to monetising assets and conduct internal stress tests on how they would react to rapid outflows within a week;
- remove an exemption for certain assets for annual testing of monetising assets;
- reduce data requests on firms in other related areas, so the new reporting requirements do not result in an overall increase; and
- encourage firms to be operationally prepared to use central bank facilities if needed.
Consultation closes on 17 June.