The PRA 110 is a challenging regulatory return and a key driver behind liquidity reviews. Kantilal Pithia and Charles Ebienang look at why firms are struggling to complete the report and how to improve the supporting processes.

Introduced in 2019, the PRA 110 looks at short-term liquidity risks and helps the regulator understand areas of potential stress. But it’s an inherently complex return, with significant data requirements, short turnaround times, and high resourcing demands. Reviewing your reporting processes can help you meet regulatory expectations and reduce the potential for greater regulatory scrutiny.

Ensuring data quality 

Data is the biggest problem for the PRA 110. The sheer volume and granularity of data needed for the report is staggering. If the data quality isn’t good enough, there will be inaccuracies in the return and it will be difficult to reconcile across other reporting templates. This is particularly important for the PRA 110, which aligns closely with the liquidity coverage ratio (LCR) template. You need to make sure that information is accurate and demonstrates a consistent picture of liquidity and financial stability across the organisation. The PRA will scrutinise any discrepancies and could commission a liquidity review to better understand your financial position.

You need effective data governance and data quality processes to ensure all information is accurate, complete, consistent, usable, and easily accessible for the intended purposes.

Breaking down the silos

With such broad data demands, the PRA 110 requires input from a wide range of teams across your firm. But business units often work in siloes and they don’t realise the importance of the data they’re providing. They have their own priorities and internal deadlines, and reporting requests may not be high on their to-do lists. As such, contributors are often late to submit their data to the reporting team, and when they do it’s often incomplete, or hasn’t been subject to robust scrutiny.

This can lead to inaccuracies and incomplete data fields in the PRA 110, increasing the potential for submitting unreliable PRA 110 returns. Improving your regulatory reporting infrastructure across all contributing departments is essential to maintain reporting quality.

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Managing your resources

Speedy reporting is essential. You need to complete PRA 110 reports regularly, generally monthly or weekly (for tier one banks), but it could even be daily if the regulator has any concerns. All firms need to be able to produce the report at short notice if the PRA asks for it. This can put additional pressure on your reporting team.

While bigger banks tend to have a specialist regulatory reporting team, smaller banks complete this work within their finance team. Firms that don’t have a clear reporting infrastructure may find the PRA 110 return dominating workloads, with skilled individuals spending too much time chasing for input and verifying key information. This can detract from other projects and essential work. Ideally, you want each business unit to send the information to your reporting team, who then simply collate it and submit the return.

Single points of failure

With banks under pressure to complete PRA 110 reports quickly, key individuals often update processes on the fly with no time to record the changes. This can introduce key person risk, with others unable to adequately step in to cover illness, holidays, or career progression. As such, it’s important to keep your policies, procedures and processes up to date to improve standardisation – regardless of who is carrying out the work.

Governance and reporting culture

You need good governance to embed effective regulatory reporting processes and maintain oversight. This includes making sure your team are following key policies and procedures, and the quality is appropriate. Firms need to produce accurate MI to document any stumbling blocks across the reporting process, with clear escalation routes to address any issues or fix any inaccuracies. Creating the right reporting culture, across all your teams will help create accurate PRA 110, reducing the potential for regulatory intervention for poor regulatory reporting.

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Thinking about reporting from the start 

When developing new initiatives, regulatory reporting is generally an afterthought at the product launch stage. But this can be a problem as there’s limited time to factor in the changes needed for the PRA 110. In the short term, manual adjustment is the only way to include the new product into the report – which can increase the potential for inaccuracies. In the long term, this leads to more reporting processes changes on the go, increasing key person risk and the potential for regulatory scrutiny.

Instead, you can think about new regulatory reporting requirements from the point of inception. This includes mapping the product profile across the business, from onboarding all the way through to regulatory oversight and MI. Working in this way will help embed new products into regulatory returns and improve accuracy.

Improving your PRA 110 return

For many of the above, poor data quality and data governance processes are the underlying issues. Ideally, you’ll want to set up a data warehouse which is essentially a data management system to centralise your internal and external data. This provides a single source of truth for use across your business and improves consistency. But it can be expensive to set up and will take time. In the short term, it’s important to review your data governance and data quality processes to ensure on-going accuracy and completeness.

Additional training can help all relevant teams understand their role in PRA 110 reporting, helping to improve engagement, turnaround times and accuracy. Your regulatory reporting team may also benefit from additional training to spot discrepancies and improve alignment across multiple reports. This needs support through effective governance to improve oversight, standardise procedures and build the right reporting culture.

Finally, it’s important to think about the role of your second and third line to provide additional oversight and assurance over your PRA 110 report. While the second line can be checking your inputs and assessing accuracy of the final report prior to submission, your third line can conduct periodic reviews of the end-to-end PRA110 production processes, specifically checking for PRA 110 return completeness and accuracy.

This independent assurance can give your senior stakeholders greater assurance over your regulatory reporting processes and reduce the potential for an s166 review or other regulatory actions.

For more insight and guidance, get in touch with Kantilal Pithia.

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