The BoE and PRA have acknowledged the ESRB recommendations on the restriction of distributions during Covid-19. They note the recommendation will apply to the UK throughout the Transition period, and also note that measures they have already taken and published are consistent with the recommendations ESRB is now making. The UK regulators do not think they need to extend their current guidance further.
The ESRB took the decisions at its meeting on 27 May, and published its recommendation on 8 June. It sees the need for an EU-wide framework so it can assess the overall financial stability implications of the various national support measures, and as a result is introducing a framework for reporting to it. Its recommendation on the restriction of distributions aims to achieve a uniform approach across countries and sectors, and its recommendation on managing liquidity risks arising from margin calls aims to limit “cliff effects” in relation to demand for collateral and enhance stress test scenarios.