SS32/15 – Pillar 2 reporting, including instructions for completing data items FSA071 to FSA082, and PRA111

1.1

This supervisory statement is of interest to banks, building societies and Prudential Regulation Authority (PRA) designated investment firms. It sets out the PRA’s expectations of firms and provides further clarity on Pillar 2 reporting.^[1]

1.2

This supervisory statement should be read alongside the Policy Statement 17/15,^[2] which includes the Reporting Pillar 2 part of the PRA Rulebook, and the Statement of Policy on Pillar 2.^[3] 

1.3

The reader is also referred to:

• Appendix 1: Guidance on terms used in data items FSA071 to FSA082, and PRA111;
• Appendix 2: Pillar 2 Reporting schedule; and
• Appendix 3: Instructions for completing data items FSA071 to FSA082, and PRA111.

2.1

In Reporting Pillar 2:

• ‘significant firm’ means a deposit-taker or designated investment firm whose size, interconnectedness, complexity and business type give it the capacity to cause very significant disruption to the UK financial system (and through that to economic activity more widely) by failing or by carrying on its business in an unsafe manner;
• ‘illiquid risk’ refers to positions in the trading or available-for-sale books that are illiquid, concentrated or one-way. To this purpose, illiquid positions are those that cannot be liquidated or immunised within a ten-day period in a stressed market environment without materially affecting market prices. Firms will be expected to identify illiquid, concentrated and one-way positions using the firms' own criteria, methods and standards.

2.2

Firms are required under the Reporting Pillar 2 part of the PRA Rulebook to report Pillar 2 data to the PRA.

2.3

This information, together with data already collected in other regulatory reports, allows the PRA to assess a firm’s Internal Capital Adequacy Assessment Process (ICAAP) and to calculate capital benchmarks for Pillar 2 risks. The data collection covers:

• the results of the Pillar 2 capital methodologies calculated by firms;
• data that are used by the PRA to process the Pillar 2A capital methodologies;
• data that allow supervisors to verify the calculation of the Pillar 2A capital methodologies;
• data that allow supervisors to assess firms’ stress test results and facilitate the calculation of the PRA buffer; and 
• data that provide additional information on the nature and scale of the Pillar 2 risks to which a firm is exposed. 

2.4

If a firm has already reported by other means, for example via the Stress Testing Data Framework (STDF), a data item that is specified in FSA080 for market risk, FSA072 and FSA073 for operational risk or FSA081 for pension risk, the firm is not required to submit it.

2.5

Firms may be asked to submit, on a case-by-case basis, further data where these are necessary to inform the PRA’s Pillar 2 methodology and supervision of the firm. These may include:

• data on operational risk from firms that are not significant firms and are using a standardised approach to calculate their Pillar 1 capital requirement for operational risk; and
• more granular pension risk data of the kind needed for FSA081 from all firms; and
• data item PRA111 on stress testing.^[4]

2.6

The content of additional reports may be tailored to the particular firm situation, with firms being given sufficient notice to comply.

2.7

The PRA has developed data items for firms to use when reporting Pillar 2 data. The data items and the related instructions should be read in conjunction with the Statement of Policy on Pillar 2A methodologies. Hyperlinks to data items and related instructions are available in Appendix 2 of this supervisory statement and on the PRA section of the Bank of England’s website.^[5] 

2.8

Firms are required to return the data items in conjunction with their ICAAP submission. Frequency of submission will depend on the frequency of ICAAP submission.

1

Guidance on terms used in data items FSA071 to FSA082, and PRA111 available at http://www.bankofengland.co.uk/prudential-regulation/regulatory-reporting/regulatory-reporting-banking-sector.

2

Pillar 2 Reporting schedule available at http://www.bankofengland.co.uk/prudential-regulation/regulatory-reporting/regulatory-reporting-banking-sector.

3

Instructions for completing data items FSA071 to FSA082, and PRA111

*A mapping table for data items FSA076 to FSA077 is available at

www.bankofengland.co.uk/pra/Documents/crdiv/mappingforpillar2creditriskdataitems.pdf