Statement
In consultation paper CP5/24 – Review of Solvency II: Restatement of assimilated law, the Prudential Regulation Authority (PRA) proposed to introduce a permission requirement, under section 138BA of the Financial Services and Markets Act (FSMA) 2023, in respect of the recognition of an increase in deferred tax assets by firms in their calculation of the loss-absorbing capacity of deferred taxes (LACDT), as part of its restatement of Commission Delegated Regulation Article 207 within the PRA’s policy framework.
Should the PRA retain that component of the proposals in CP5/24 in its final policy, the PRA is considering whether it is appropriate to introduce a temporary delay in implementing that requirement. Such delay would be to provide firms with additional time to submit relevant applications for s138BA permissions.
In any event, firms must ensure that they can continue to justify using increases in deferred tax assets in their LACDT calculations consistently with the existing requirements and taking into account all relevant matters.
The PRA will publish its final policy on CP5/24 proposals in mid-November. If the PRA decides to delay implementation of the requirement mentioned above, it will provide additional details in that publication.