Applying to UK banks, building societies, PRA designated firms, and UK branches of EEA firms, the PRA 110 return helps the regulator to assess liquidity risk on a more granular basis than before. Larger firms, holding assets of €30 billion or above, must complete the return on a weekly basis, while smaller firms are expected to complete the return monthly. The PRA has made some changes to the return which will become effective from January 2020.
PRA 110 looks at short-term risks (less than 30 days), cash flow mismatches, liquidity cliffs, enhanced stress testing and benchmarking with peers. Specifically, it will help the PRA identify where:
The return is particularly complex and many banks have struggled to put the necessary measures in place to meet the first reporting deadline. Many firms have adopted a tactical approach to get them over the line, which has had distinct disadvantages for the following reasons:
But, once the basics are in place, you should reassess your processes (including controls), your Pillar 2 risks and your stress scenarios to make sure you can meet the reporting requirements on a long term basis.
You should undertake a gap analysis and put together a coherent strategy to complete the PRA 110 return regularly, this may include software solutions. The strategy should consider:
We can help you implement an effective strategy around the PRA 110 return and Pillar 2, establishing processes to help you collect high quality information to meet your regulatory requirements. For further information, please contact Paul Young or Ian Morton.