Prudential Regulation Authority Addresses ABA Members

The PRA addressed a well-attended meeting at the ABA offices last week and guided members through the key points of their most recent priorities letter.

The authority concentrated on challenges connected to geopolitical hazard and operational resilience, highlighting the capacity of geopolitical risk to cut across credit market operations and expose interconnected vulnerabilities that might not previously have been evident.

Speakers advised UK management teams to be alert to the transition mechanisms whereby geopolitical risk might be transferred to the UK, and to maintain a clear and well-articulated booking model in which booking practices were aligned with a team’s risk-management appetite. They also highlighted the importance of effective data analysis to enable banks to understand how previously uncorrelated risk can become linked, and how exposure across different business lines might aggregate. 

The panel then addressed the intersectional relationship between geopolitical and operational risk and vulnerabilities to harm deriving from state-sponsored actors. This risk was amplified, in trade finance in particular, by a growing reliance on third party vendors and digitalisation. They stressed the need for the continuous upgrading of operational resilience testing as new products were rolled out, a process which needed to extend beyond prevention, to include contingency planning and measures to safeguard continuity and enable speedy recovery when an incident occurred. 

It reminded members of the January 1st 2027 deadline  for the implementation of Basle 3.2 and that banks will need to be prepared from the fourth quarter of this year.

The authority is moving from an annual to a biennial cycle for its periodic summary meetings, to enable companies to better focus on remediation and reduce friction in regulatory transactions. 

The meeting was the last event held at our offices at 43 Upper Grosvenor Street, which has been the ABA’s home for fifteen years. You can now find us at: 16  Berkeley St, London W1J 8DZ.