CP12/24 – Resolution assessments: Amendments to reporting and disclosure dates

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Responses are requested by Friday 8 November 2024.

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In the policy statement for this consultation, the PRA will publish an account, in general terms, of the representations made as part of this consultation and its response to them. In the policy statement, the PRA is also required to publish a list of respondents to its consultations, where respondents have consented to such publication.

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Responses can be sent by email to: CP12_24@bankofengland.co.uk.

Alternatively, please address any comments or enquiries to:
Recovery, Resolution and Resilience Team
Prudential Regulation Authority
20 Moorgate
London
EC2R 6DA

Additional Context

1: Overview

1.1 This consultation paper (CP) sets out the Prudential Regulation Authority’s (PRA) proposal to make amendments to PRA rules and expectations in respect of firms’ reporting and disclosure obligations pertaining to resolution assessments.

1.2 The proposal in this CP would result in changes to the Resolution Assessment Part of the PRA Rulebook (Appendix 1) and supervisory statement (SS) 4/19 – Resolution assessment and public disclosure by firms (Appendix 2).

1.3 Under the current rules, each firm to which the Resolution Assessment Part applies is required to carry out an assessment of its preparations for resolution and submit a report to the PRA every two years, by the first Friday in October. Each firm must then publish a summary of its report by the second Friday in June of the following year. Separately, the Bank carries out an assessment of these firms’ preparations for resolution and makes a public statement on each firm’s resolvability at the same time as the firms publish their disclosures.

1.4 The PRA is proposing to amend rules 3.1 and 4.1 of the Resolution Assessment Part so that the timing of future submissions and disclosures would no longer be fixed to two-year cycles. Firms would continue to be subject to reporting and disclosure obligations on their resolvability but on a periodic basis, with more details provided in SS4/19. The PRA’s expectations on firms as to the reporting and disclosure dates would be communicated in advance of each cycle, taking account of the need to provide time for firms to plan and prepare their reports. The changes proposed in this CP would:

• remove the prescribed report submission dates from Resolution Assessment 3.1;
• remove the prescribed disclosure dates from Resolution Assessment 4.1; and
• amend SS4/19 to reflect the updated rules and to set out expectations to firms about the timing of future submissions and disclosures.

1.5 The proposal in this CP is relevant to the UK banks and building societies to which the Resolution Assessment Part applies (‘firms’).^{footnote [1]}

1.6 The PRA views that the changes proposed in this CP do not have a material cost-benefit impact. More details can be found in chapter 2 of this CP.

1.7 The PRA has a statutory duty to consult when changing rules (Financial Services and Markets Act 2000 (FSMA) s138J), or standards instruments (s138S of FSMA). When not making rules, the PRA has a public law duty to consult widely where it would be fair to do so. 

1.8 In carrying out its policymaking functions, the PRA is required to comply with several legal obligations. The analysis in this CP explains how the proposal has had regard to the most significant matters, including an explanation of the ways in which having regard to these matters has affected the proposal. Due to the straightforward nature of the proposal, the PRA has not consulted any of the statutory panels about the proposal in this CP.

Implementation

1.9 The PRA proposes that the changes resulting from this CP would come into effect on publication of the final policy envisaged by end 2025 Q1.

Responses and next steps

1.10 This consultation closes on Friday 8 November 2024. The PRA considers that a one-month consultation period, which is shorter than the PRA’s standard approach of three months, is appropriate in order to provide firms with certainty on the timing of the next resolution assessment. The PRA notes that the proposal in this CP only relates to the amendments to reporting and disclosure dates, but not other aspects of resolution assessment.

1.11 The PRA invites feedback on the proposal set out in this consultation. Please address any comments or enquiries to CP12_24@bankofengland.co.uk.

1.12 When providing your response, please tell us whether you consent to the PRA publishing your name, and/or the name of your organisation, as a respondent to this CP.

1.13 Please also indicate in your response if you believe the proposal in this CP is likely to impact persons who share protected characteristics under the Equality Act 2010, and if so, please explain which groups and what the impact on such groups might be.

1.14 Unless otherwise stated, any remaining references to EU or assimilated legislation refer to the version of that legislation which forms part of assimilated EU law.^{footnote [2]}

2: The PRA’s proposal

2.1 The PRA proposes to amend the Resolution Assessment Part of the PRA Rulebook and SS4/19. The purpose of the proposed changes is to provide greater flexibility over the timing of the reporting^{footnote [3]} and disclosure^{footnote [4]} requirements, while ensuring that firms periodically continue to report and disclose their assessments of their preparations for resolution.

2.2 The PRA has twice modified the timings set out in these rules:

• In May 2020, the reporting and disclosure dates for the first cycle were delayed by one year to provide operational relief to firms during the Covid-19 pandemic. This was initially done by the PRA through offering a modification by consent, followed by CP19/20 and policy statement (PS) 10/2 – Resolution assessments: Amendments to reporting and disclosure dates to update the rules and SS4/19.
• In May 2024, the Bank and PRA chose to delay publication of the 2024 assessment until after the General Election. In June 2024, the PRA offered a modification by consent to Resolution Assessment 4.1 to delay the deadline by which firms are required to publish disclosures, in order to enable them to be published at the same time as the publication of the Bank’s 2024 assessment.

2.3 The PRA proposes to remove the prescribed dates currently set out in Resolution Assessment 3.1 and 4.1, to provide greater flexibility to the timing of future reporting and disclosures. The PRA proposes to set out in SS4/19 that a firm would be expected to continue to report and disclose a summary of its assessment periodically, as communicated by the PRA (see paragraph 2.5), and no more frequently than every two years.

2.4 Taking into account the findings from previous assessments of firms’ preparations for resolution by the Bank and any other relevant factors, the PRA may consider it appropriate to vary the gap between the start of each reporting and disclosure cycle rather than maintaining a two-yearly cycle. For example, the PRA may consider that firms need more time to undertake further work based on the findings of the previous assessment or to conduct more testing, so that firms could provide better assurance over their resolvability capabilities as part of their next report. The PRA considers that this proposal better supports firms’ ongoing preparations for resolution, in line with Fundamental Rule 8.

2.5 The PRA proposes that it will communicate on its website its expectations as to the dates for future resolution assessment reports and disclosures at least 12 months in advance of the expected submission and publication dates. In practice, the PRA would seek to communicate the expected dates earlier to support firms with their planning. The PRA would expect to publish the next reporting and disclosure dates at the same time as the Bank publishes its most recent assessment of the firms’ resolvability. The PRA anticipates that reports would generally be due in October and disclosures would generally be due in June the following year. This means firms would typically have 15 months to prepare their next report in the event of a two-year gap between the start of each reporting cycle; and 27 months to prepare their next report in the event of a three-year gap.

2.6 Notwithstanding the 12-month minimum period, the PRA notes that it may sometimes be necessary to revise a reporting or disclosure date in short order, for example in response to unforeseen events. In such cases the PRA and the Bank would engage with firms and communicate a revised date.

2.7 The PRA also proposes consequential amendments to SS4/19, including updates to the sections on waivers and modifications and transitional arrangements to reflect the removal of prescribed reporting and disclosure dates from the Resolution Assessment Part. The proposal in this CP does not change the current SS4/19 content about a firm that may seek to alter its own reporting or disclosure date in light of circumstances such as mergers or acquisitions.

2.8 The proposal in this CP does not change the current expectation on a firm to carry out an adequate assessment of its preparations for resolution and undertake testing and review of its preparations at a suitable frequency to ensure that its assessment remains up to date and accurate.^{footnote [5]} Resolvability will remain a continuing obligation for firms and a priority for the PRA.

2.9 Subject to the outcome of this consultation, and as announced in the Bank’s 2024 assessment (which is the second assessment), the PRA intends to communicate to firms that the third assessment will take place in 2026-27. This means that firms would be due to submit their reports in October 2026 and publish disclosures in June 2027. This timeline will enable firms to focus on the delivery of key activities ahead of the next assessment, including further embedding their resolvability capabilities and expanding their testing. The PRA also notes that the Bank is asking firms to undertake targeted work ahead of the third assessment, including on Valuations, Restructuring Planning and firms’ assurance over their preparations for resolvability. All of these activities help ensure firms’ resolvability capabilities are, and remain, ready for use if needed, in accordance with Fundamental Rule 8. This timeline would support the PRA and the Bank, as well as firms, to prepare for more detailed assessment activities in the third assessment. The PRA and the Bank will consider the timing of subsequent assessments based on the findings of the third assessment and further progress made by firms.

PRA objectives analysis

2.10 The PRA considers that the proposal in this CP advances the PRA’s primary objective of safety and soundness of firms. Firms will still be required to assess their preparations for resolution, submit reports to the PRA and each publish a summary of their report. The proposed changes would provide greater flexibility on the timing of firms’ submissions and disclosures. The PRA considers that the ability to more easily amend the timeline for reports and disclosures could better promote the safety and soundness of firms, because the dates could be delayed to alleviate the burden on firms in response to unforeseen events without the need for a rule modification; or a longer interval between the assessments could allow firms more time to progress work in relation to their resolvability before the next report is due. For example, the PRA’s intended timeline for the third report submission and disclosure will enable firms to focus on the delivery of key activities before the next report is due. Consistent with the expectation that firms take ownership of their own resolvability, this includes further testing and refinement of firms’ preparations for resolution. This helps to ensure that firms’ preparations are ready for use if needed in line with Fundamental Rule 8 and the PRA’s primary objective.

2.11 The PRA considers that the proposal in this CP will not have a material impact on its secondary objectives to facilitate effective competition, and international competitiveness and growth of the economy. This is because the proposal would only impact the reporting and disclosure dates of resolution assessments. Firms will still be subject to the requirements of conducting resolution assessments, submitting reports and publishing disclosures.

Cost benefit analysis (CBA)

2.12 The PRA anticipates that the proposal would not increase or materially change the costs borne by firms under the current rules. This is because firms will not be expected to submit reports or publish disclosures any more frequently than at present. The PRA does not expect additional costs to the PRA or other stakeholders. Dates will be communicated sufficiently in advance to support firms with their planning.

2.13 In terms of benefits, given that reporting and disclosure cycles would continue to take place no more frequently than at present and may take place less often subject to ongoing progress, there may be less cost in relation to reporting and disclosure. Under the current rules, if the PRA proposes to vary the timing of reporting or disclosure dates, a firm would need to apply for or consent to a rule modification in the first instance. With the proposal, firms would no longer need to do so and could benefit from a minor reduction in costs. The PRA would similarly benefit from not having to process waiver applications. Moreover, the PRA considers that this change would allow the PRA to supervise firms and the Bank to assess firms more effectively, supporting the safety and soundness of firms (see paragraph 2.10) and financial stability.

2.14 Overall, the PRA considers that the changes to costs and benefits are not material. As a result, the PRA has not consulted the CBA Panel, in accordance with s138L(3) of FSMA.^{footnote [6]}

‘Have regards’ analysis

2.15 In developing the proposal, the PRA has had regard to its framework of regulatory principles. The regulatory principles that the PRA considers are most material to the proposal include:

• Transparent exercise of PRA’s functions: The proposal includes amendments to SS9/14 to provide additional information to firms regarding the PRA’s expectations as to the timings of reporting and disclosures.
• Proportionality: The PRA may consider it appropriate and proportionate to amend dates of future report submissions and public disclosures which could be done without firms needing to apply for or consent to a rule modification. As an example, the intended timing of the third report submission and disclosure recognises progress made by in-scope firms and capacity within firms to progress other resolvability work in the interim.

2.16 The PRA has had regard to other factors as required. Where analysis has not been provided against a ‘have regard’ for this proposal, it is because the PRA considers that ‘have regard’ to not be a significant factor for the proposal.

Impact on mutuals

2.17 The PRA considers that the impact of the proposed changes on mutuals is expected to be no different from the impact on other firms, which is minimal. This is because the proposed amendments only relate to the dates for reports and disclosures and do not affect firms differently depending on mutual status.

Equality and diversity

2.18 In developing its proposal, the PRA has had due regard to the equality objectives under s149 of the Equality Act 2010. The PRA considers that the proposal does not give rise to equality and diversity implications because it does not change the requirements on firms to submit reports and publish disclosures. The changes will instead provide more flexibility over the timing of Resolution Assessment report submission and disclosure dates.