PRA is consulting on a plan to reduce its expectations on some firms in relation to recovery planning. The BRRD gives regulators the discretion to do this for firms whose failure would not be expected to have a significant negative effect on markets, other institutions, funding conditions or the wider economy. In 2017, PRA said it was applying the principle of proportionality, but now proposes to formalise its stance. It will do so by assessing each institution except G-SIIs and O-SIIs to give them a quantitative score, and would then carry out a qualitative assessment on those below a certain threshold. For firms that qualify (both credit institutions and investment firms) it would require only two scenarios to be included as the minimum in a recovery plan, and not the four that are otherwise expected.
PRA would propose to identify the firms eligible for what it calls “Simplified Obligations” later this year, and then apply the new expectations with immediate effect.
Consultation closes on 23 October.