UK Prudential Regulation Authority Consults On Pillar 2 Liquidity Risk Requirements

On May 12, 2016, the Prudential Regulation Authority published a consultation paper on its proposed approach to Pillar 2 liquidity requirements for intraday risk, debt buyback and non-margined derivatives, including a proposed policy statement. The CRD gives national regulators discretion to set Pillar 2 liquidity requirements, in addition to the standard Pillar 1 LCR which applies to all firms. The PRA is proposing that: (i) the level of application for setting Pillar 2 requirements should be aligned to the Pillar 1 approach; (ii) there should be no specific disclosure requirements under Pillar 2, other than the disclosure of the high quality liquid assets required to cover Pillar 2 risks which are part of the LCR disclosure requirements; (iii) it will use supervisory discretion, guided by a firm's outstanding debt or exposures, to assess liquidity risk linked with debt buyback and non-margined derivatives; and (iv) the assessment of intraday liquidity risk will be