Shearman & Sterling LLP | FinReg | Bank of England Announces COVID-19 Policy Measures
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  • Bank of England Announces COVID-19 Policy Measures
    The Bank of England has announced a series of supervisory and policy measures designed to help firms prudentially regulated by the U.K. Prudential Regulation Authority (banks, building societies, insurers and large investment firms) and BoE-regulated financial market infrastructures (CCPs, central securities depositories and recognized payment systems) with the impact of COVID-19.

    The BoE’s measures include:
    • Cancellation of the 2020 annual stress tests of eight major U.K. banks and building societies. The move is designed to enable lenders to focus on providing credit for U.K. households and businesses. On March 12, 2020, the European Banking Authority announced its decision to postpone its EU-wide stress test until 2021. The EBA has also recommended that national regulators consider postponing non-essential supervisory activities and offer leeway in remittance dates for certain aspects of banks’ supervisory reporting obligations. The U.K. Financial Policy Committee and Prudential Regulation Committee have agreed to reduce counter-cyclical buffers to 0% of banks’ exposures to U.K. borrowers for at least 12 months, with any subsequent increase not expected to take place until March 2022.
    • Delayed publication of the results of the BOE’s 2019 biennial exploratory scenario, which have been postponed until further notice so as to relieve bank treasury staff from the related additional administrative burden.
    • Issuing guidance on IFRS 9 and COVID-19. The BoE and PRA remind firms that forward-looking information used to form the basis of adjustments to expected credit loss estimates for the purposes of COVID-19 should be reasonable and supportable under IFRS 9 accounting standards. In particular, the PRA expects firms to bear in mind that, at this stage, reliable information upon which to base such forecasts is limited. Where forecasts are made, firms should take account of the temporary nature of the shock caused by the pandemic and the relief measures being put in place by U.K. authorities. 
    • Postponement of supervisory programs, including non-critical obligations for individual firms and financial market infrastructures and the BoE’s open-ended funds investigation. The BoE also intends to suspend the deadline for responses to certain BoE and PRA consultations, including the joint BoE/PRA consultation on operational resilience in financial services and the PRA consultation on outsourcing and third-party risk management until October 1, 2020, and to postpone the implementation of the PRA’s proposed changes to internal ratings based models until January 1, 2022.

    View the BoE's statement on COVID-19 supervisory and policy measures.

    View the EBA's announcement on postponement of EU-wide stress tests.

    View the BoE's statement on the FPC's reduction of the counter-cyclical buffer.

    View details of the BoE's consultation on operational resilience in financial services.

    You may wish to view our client note, “COVID-19: Bank of England Announces Policy Measures for Financial Market Participants”.

    Details of other regulatory responses to COVID-19 are available at our COVID-19 Research Center.

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