FIN.

PRA updates on capital arbitrage transactions approach

The PRA has issued a statement acknowledging that some PRA-regulated firms have conducted (or may be considering doing so) deficit reduction transactions with their defined benefit pension schemes that are structured to limit the regulatory capital impact that would otherwise result.

The PRA is encouraging firms not to engage in transactions that have the aim of offsetting regulatory adjustments and it will be scrutinising transactions in light PRA rules and Basel standards, including any transactions that would allow firms to avoid regulatory capital deductions under Article 36(1) CRR.

Where any existing transactions are to be unwound, the PRA will look to agree a reasonable timeline with firms to achieve this.

 

Lucy Hadrill