PRA issues consultation paper on Pillar 2 Liquidity

PRA has published Consultation Paper CP13/17 on Pillar 2 liquidity which includes the following proposals:

  • for a cash flow mismatch risk (CFMR)  and other PRA methodologies for assessing firms’ liquidity risk;
  • A new liquidity reporting template which is based on the EBA ML reporting template; and
  • Updating PRA’s Supervisory Statement (SS) 24/15 and SS34/15 draft reporting rule changes, and a draft reporting template and instructions relating to CFMR.

It is hoped that these changes will ensure that firms have adequate liquidity, which contributes to the PRA’s objective of promoting the safety and soundness of firms.

The new rules will apply to UK banks, building societies and PRA-designated investment firms and firms will be required apply the new methodologies at the time of the next requirements setting process for the firm.

PRA is also seeking:

  • Comments on its draft Statement of Policy, which combines the proposals from CP13/17 with those from CP21/16; and
  • Early views on aspects of the calibration of overall liquidity requirements that will be consulted on in a third consultation paper.

The deadline for firms to respond to the CP is 13 October 2017 and PRA plans to implement Pillar 2 in early 2018.