Bank of England Archives - The Industry Spread

Second meeting of the PRA and FCA’s joint Climate Financial Risk Forum

August 13, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, CFRF, Climate Financial Risk Forum, PRA

Since its inception in March 2019, the Climate Financial Risk Forum has set up four technical working groups on disclosure, scenario analysis, risk management and innovation. Each working group is chaired by a CFRF member and supported by an external secretariat. Membership consists of wider industry participants, including trade associations, to ensure the perspective of a broad range of firms is represented. Each working group has planned the approach they propose to take and the outputs they will deliver in terms of practical guidance/ best practice material.

FCA

July 2019 meeting

The PRA and FCA hosted the second meeting of the CFRF in July 2019. At the meeting, the working group chairs presented the draft plans and progress to date. The CFRF members agreed the plans, noting the importance of considering the following:

how outputs draw upon international best practice
how to ensure outputs are suitable for firms of different types, sizes and complexity
how to ensure coordination between the working groups

The meeting also discussed the form of the outputs and the timeline for publishing them, as well as how to get wider industry input into the process. It was agreed that the CFRF will aim to publish these outputs in early 2020.

The next CFRF meeting will take place in Q4 2019.

Full background and information for the launch of the CFRF is available in the Press Release for the first meeting of the PRA and FCA.

Bank of England and Prudential Regulation Authority finalise the Resolvability Assessment Framework

July 31, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England

Resolution is the process by which authorities intervene to manage the failure of a bank in an orderly way. This process reduces risks to depositors, the financial system, and public finances. The financial crisis, in which governments used taxpayer money to bail out banks and their losses, showed the need for an effective resolution regime as disorderly bank failure is disruptive and costly.

Resolvability Assessment Framework

The Resolvability Assessment Framework (the framework) establishes the capabilities firms should have and the outcomes they must achieve to be resolvable. The framework is designed to make sure firms are accountable for their own resolvability. This is done by setting out a clear framework as to how the Bank will assess firms’ resolvability and requiring major UK firms publicly disclose a summary of their own resolvability assessment. The framework is implemented by:

The Bank of England’s approach to assessing resolvability, as set out in the Statement of Policy published today. The Bank will assess firms against three resolvability outcomes they must meet by 2022: i) having adequate financial resources, ii) being able to continue to do business through resolution and restructuring, and iii) being able to communicate and coordinate within the firm and with authorities. This applies to all UK firms with a bail-in or partial transfer resolution strategy and material UK subsidiaries of overseas-based firms.
The PRA’s new requirements on firms as set out in the new Resolution Assessment part of the PRA Rulebook and the accompanying Supervisory Statement. The PRA rules require major UK banks, with £50bn or more in retail deposits, to assess their preparations for resolution, submit reports of their assessment to the PRA and publicly disclose a summary of their report. As per the consultation paper, these assessments and disclosures will work on a two-year cycle. Firms will submit the first of these reports on their resolution assessments to the PRA by October 2020 and publicly disclose their summaries by June 2021.

As part of the new framework, the Bank will publicly disclose this assessment for the major UK banks for the first time. The intention is for this to take place at the same time as the firms make their own disclosures.

The framework is an important step towards delivering the Bank’s commitment to Parliament that major UK banks will be resolvable by 2022. Accountability and transparency of firms’ resolvability will increase public awareness of resolution, help market participants make better informed investment decisions and incentivise firms to meet the resolvability outcomes by 2022.

The framework and the resolution regime will allow bank services to continue during and after resolution, so that authorities or new management can restructure the bank as necessary. This reduces the risks to depositors, the financial system and taxpayers.

Deputy Governor for Financial Stability, Jon Cunliffe, said: “We have made major reforms since the financial crisis to make firms resolvable and ensure that those who profit from banks’ success also pay when they fail. Increased transparency about the resolution regime is in the public’s interest and also incentivises firms to make further progress on their resolvability.”

Deputy Governor for Prudential Regulation and Chief Executive Officer of the Prudential Regulation Authority, Sam Woods, said: “The framework we have published today will build on the significant reforms made to the resolution regime over the past few years and contribute to a safer financial system.”

Annual analysis of revisions to money, credit and effective interest rates data (2014-16)

July 30, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, Data and Statistics Division

Each year the Bank publishes analysis of the revisions to its monthly data on money, credit, and effective interest rates produced by the Data and Statistics Division (DSD). This year’s analysis shows that the revisions can be considered as immaterial for most series tested. This is the same broad conclusion as the 2018 analysis of 2013-15 data and the 2017 analysis of 2012-14 data.

Revisions are a normal part of the data production process. There are several reasons why data might be revised after its initial publication. Reporters of data to the Bank may submit corrections to earlier data if they discover errors or make improvements to their data systems. In addition, the Bank might change the methodology it uses to produce the data. Also, the seasonal adjustment process can lead to revisions to an entire series, as each new data point provides new information about the seasonal pattern of the data.

Revisions analysis gives users an indication of how much weight to place on data when it is first released. Early releases of data that tend to receive few revisions can be regarded as less noisy and more reliable.

Revisions can be measured in different ways. The tables below show a variety of metrics for the money and credit and effective rates data. Tables 1 and 2 illustrate the size of revisions, showing the mean revision, mean absolute revision and average published outturn. Tables 3 and 4 present metrics to analyse bias in the data. For each series, a T-test is conducted. This is the simplest test for bias, and is a function of the mean and standard deviation of the revisions, and the number of observations. However, this test is only properly valid when the sample of revisions is independently and identically distributed, and fails if revisions are subject to autocorrelation or to non-constant variance (heteroskedasticity). Tables 3 and 4 include alternative tests for bias that control for this. The adjusted t-test takes into account any first order autocorrelation in the revisions; and the Newey-West test is valid when heteroskedasticity and autocorrelation is present in revisions to the previous two months of data. Tables 5 and 6 provide further analysis of the revisions, showing the root mean squared revision, the ratio of this to the mean of the revised data, and ratio of the mean squared revision to the variance of the revised data.

To view all related tables, please download the full article:

Annual analysis of revisions to money, credit and effective interest rates data (2014-16)

Alan Turing to be the face of new £50 note

July 16, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: ACE, Alan Turing, Bank of England, WWII

Making the announcement at the Science and Industry Museum in Manchester, the Governor also revealed the imagery depicting Alan Turing and his work that will be used for the reverse of the note. The new polymer £50 note is expected to enter circulation by the end of 2021.

Alan Turing was chosen following the Bank’s character selection process including advice from scientific experts. In 2018, the Banknote Character Advisory Committee chose to celebrate the field of science on the £50 note and this was followed by a six week public nomination period. The Bank received a total of 227,299 nominations, covering 989 eligible characters. The Committee considered all the nominations before deciding on a shortlist of 12 options, which were put to the Governor for him to make the final decision.

Mark Carney, Governor of the Bank of England, commented: “Alan Turing was an outstanding mathematician whose work has had an enormous impact on how we live today. As the father of computer science and artificial intelligence, as well as war hero, Alan Turing’s contributions were far ranging and path breaking. Turing is a giant on whose shoulders so many now stand.”

Alan Turing provided the theoretical underpinnings for the modern computer. While best known for his work devising code-breaking machines during WWII, Turing played a pivotal role in the development of early computers first at the National Physical Laboratory and later at the University of Manchester. He set the foundations for work on artificial intelligence by considering the question of whether machines could think. Turing was homosexual and was posthumously pardoned by the Queen having been convicted of gross indecency for his relationship with a man. His legacy continues to have an impact on both science and society today.

The shortlisted options demonstrate the breadth of scientific achievement in the UK, from astronomy to physics, chemistry to palaeontology and mathematics to biochemistry. The shortlisted characters, or pairs of characters, considered were Mary Anning, Paul Dirac, Rosalind Franklin, William Herschel and Caroline Herschel, Dorothy Hodgkin, Ada Lovelace and Charles Babbage, Stephen Hawking, James Clerk Maxwell, Srinivasa Ramanujan, Ernest Rutherford, Frederick Sanger and Alan Turing.

Sarah John, Chief Cashier, said: “The strength of the shortlist is testament to the UK’s incredible scientific contribution. The breadth of individuals and achievements reflects the huge range of nominations we received for this note and I would to thank the public for all their suggestions of scientists we could celebrate.”

The new £50 note will celebrate Alan Turing and his pioneering work with computers. As shown in the concept image, the design on the reverse of the note will feature:

A photo of Turing taken in 1951 by Elliott & Fry which is part of the Photographs Collection at the National Portrait Gallery.
A table and mathematical formulae from Turing’s seminal 1936 paper “On Computable Numbers, with an application to the Entscheidungsproblem” Proceedings of the London Mathematical Society. This paper is widely recognised as being foundational for computer science. It sought to establish whether there could be a definitive method by which any theorem could be assessed as provable or not using a universal machine. It introduced the concept of a Turing machine as a thought experiment of how computers could operate.
The Automatic Computing Engine (ACE) Pilot Machine which was developed at the National Physical Laboratory as the trial model of Turing’s pioneering ACE design. The ACE was one of the first electronic stored-program digital computers.
Technical drawings for the British Bombe, the machine specified by Turing and one of the primary tools used to break Enigma-enciphered messages during WWII.
A quote from Alan Turing, given in an interview to The Times newspaper on 11 June 1949: “This is only a foretaste of what is to come, and only the shadow of what is going to be.”
Turing’s signature from the visitor’s book at Bletchley Park in 1947, where he worked during WWII.
Ticker tape depicting Alan Turing’s birth date (23 June 1912) in binary code. The concept of a machine fed by binary tape featured in the Turing’s 1936 paper.

The full note design including all the security features will be unveiled closer to it entering circulation.

FCA and PRA jointly fine Raphaels Bank £1.89m for outsourcing failings

May 31, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, FCA, PRA, Raphaels Bank

Raphaels Bank has received separate fines of £775,100 from the FCA and £1,112,152 from the PRA in respect of these breaches (resulting in a combined fine of £1,887,252).

Mark Steward, FCA Executive Director of Enforcement and Market Oversight said:

‘Raphaels’ systems and controls supporting the oversight and governance of its outsourcing arrangements were inadequate and exposed customers to unnecessary and avoidable harm and inconvenience. There is no lower standard for outsourced systems and controls and firms are accountable for failures by outsourcing providers.’

Sam woods

Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:

‘Firms’ ability to manage outsourcing of any critical activities is a vital part of maintaining their safety and soundness. Such outsourcing is an important part of a firm’s operational resilience, and particularly so in the case of Raphaels given the level of reliance on outsourcing in its business model.

In addition, this was a repeat failing which demonstrates a lack of adequate and timely remediation. This is a significant aggravating factor in this case, leading to an uplift in the penalty.’

Raphaels is a retail bank providing banking and related financial services. Its Payment Services Division (PSD) operates prepaid card and charge card programmes in the UK and Europe. The PSD relies on outsourced service providers to perform certain functions that are critical to the operation of its card programmes. These functions include the authorisation and processing of card transactions, a service performed by third party card processors.

Raphaels failed to have adequate processes to enable it to understand and assess the business continuity and disaster recovery arrangements of its outsourced service providers – particularly how they would support the continued operation of its card programmes during a disruptive event. The absence of such processes posed a risk to Raphaels’ operational resilience and exposed its customers to a serious risk of harm. These risks crystallised on the 24 December 2015 when a technology incident occurred at a card processor.

The incident caused the complete failure of the authorisation and processing services it provided to Raphaels and lasted over eight hours. During this period, 3,367 customers were unable to use their prepaid cards and charge cards. In total, the card processor could not authorise 5,356 customer card transactions attempted at point of sale terminals, ATM machines and online. Seasonal workers, who depended on their cards to receive their wages, used the largest prepaid card programme affected by the incident. The timing of the incident, on Christmas Eve, is likely to have exacerbated the impact of the outage.

Raphaels’ specific failings in relation to the incident resulted from deeper flaws in its overall management and oversight of outsourcing risk from Board level down. The joint FCA and PRA investigation identified weaknesses throughout the Firm’s outsourcing systems and controls which Raphaels ought to have known about since April 2014. These included a lack of adequate consideration of outsourcing within its Board and departmental risk appetites, the absence of processes for identifying critical outsourced services and flaws in its initial and on-going due diligence of outsourced service providers. Raphaels’ outsourcing arrangements continued to be inadequate until the end of 2016, by which time Raphaels had designed new outsourcing policies and procedures to remedy the failings.

Raphaels agreed to resolve this matter and therefore qualified for a 30% reduction in the fines imposed by both regulators. Without this discount, the combined fine imposed by the FCA and PRA would have been £2,709,574.

Press release

Friday Payrolls Day, Dollar Edges Higher as Bond Yields Climb

May 3, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Bank of England, Brexit, ECB, EUR-USD, Eurozone, FOMC, GBP-USD, Jerome H. Powell, US NFP

Summary: The US Dollar maintained its bid tone, edging higher against its rivals, boosted by higher bond yields. Jerome Powell’s comments on “transitory” factors dragging on inflation saw US rate cut bets pared by interest rate futures traders. The 10-year US bond yield climbed 4 basis points to 2.54%. Markets also anticipated a strong Payrolls report for April following Wednesday’s better-than-expected ADP private jobs number. The Euro bore the brunt of Dollar strength, slipping 0.28% to 1.1175. Euro area data were mostly in line with expectations.
Sterling eased to 1.3035 (1.3050) after the Bank of England kept rates on hold and lifted growth forecasts but warned that Brexit continued to cloud policy. The Australian Dollar edged lower to close around the 0.70 cent level.

BLOOMBERG BOE Growth Forecasts Chart – 03 May 2019

Economic releases yesterday saw US Factory Orders rise 1.9% in April beating forecasts of 1.0%. Weekly Unemployment Claims in April matched March’s 230,000 against an expected 220,000.

EUR/USD – The Single Currency fell to immediate support at 1.11706 overnight lows, settling at 1.1175. Euro area Manufacturing PMI’s saw better-than-expected results in France, Italy and Spain, while Germany’s was flat. German 10-year Bund yields climbed 2 basis points to 0.03%.
GBP/USD – Sterling slipped despite the Bank of England suggesting the next likely move in interest rates was higher although they would remain on hold for now. The overall stronger Dollar weighed on the Pound which ended down 0.23% at1.3035.
AUD/USD – The Aussie fell back to its support level and closed at 0.7000 cents on the broadly stronger Greenback. Australia’s 10-year bond yield was unchanged at 1.78% which contrasted with the 4-basis point climb of its US counterpart.

On the Lookout: It’s all about the Payrolls. Markets are anticipating a strong report. Median forecasts from analysts centre around a Non-Farms Employment gain of 190,000 from March’s +196,000. The Unemployment rate is expected to remain at 3.8%. Average Hourly Earnings (Wages) are forecast up at 3.3% annually, or 0.3% for April (0.1% March). The risk is for a weaker number which is possible given the rise in Unemployment claims and layoffs.
Australia will start off the day with its report on Building Approvals for April. Following March’s gain of 19.1%, forecasts are for a fall of 12.5% in April. A fall of over 12.5% will pressurize the Aussie.
Traders will also look out for Eurozone Annual Flash Headline and Core CPI reports, both of which are forecasted to have gained over the previous number.
China and Japan are off today which would make for less liquid trading.

Trading Perspective: The markets are bulled-up on the Dollar post-FOMC and in anticipation of a strong Payrolls number. US NFP will have to be stronger-than-forecast to push bond yields and US Dollar higher. Anything weaker risks disappointment. Market positioning is also long USD bets at multi-year highs.

EUR/USD – The Single currency closed just above immediate support at 1.1170. The overnight traded was 1.12189. While the Euro is under 1.1200 there is a chance for a test lower at the next support level of 1.1160. Strong support lies at 1.1140. Immediate resistance can be found at 1.1200 and 1.1220. Look for consolidation ahead of the Eurozone CPI and US Payrolls reports later. Likely range 1.1160-1.1210. Prefer to buy dips.

TRADING VIEW – AUD USD Chart – 03 May 2019

AUD/USD – The Aussie Battler fell to 0.69949 under the weight of the overall stronger Greenback. Immediate support can be found at 0.6960 followed by 0.6940. Immediate resistance lies at 0.7030 and 0.7060. Australian Building Approvals will be the first number to affect the currency. Anything less than the forecast of -12.5% will support the Australian Dollar. Market positioning in the Aussie is short. The latest COT/CFTC report saw a modest increase in speculative Aussie short bets to -AUD 50,400 contracts from -AUD 49,600. Likely range 0.6975-0.7025. Prefer to buy dips
GBP/USD – Despite the 0.23% drop to 1.3035, Sterling kept its head above 1.3000. The BOE is the only central bank that has a hawkish bias among the Fed, ECB, BOJ, BOC, RBA, and RBNZ. However, Brexit remains a big risk. GBP/USD has immediate support at 1.3000 followed by 1.2960. Immediate resistance can be found at 1.3060 and 1.3080 (overnight high traded 1.30803). The next move in Sterling will depend on the US Dollar. Look for a likely range of 1.3000-1.3100. Look to trade the range.
USD/JPY – was little-changed at 111.50 (1.1142 yesterday). USD/JPY traded to an overnight low of 111.35 which is where immediate support lies. The next support level is at 111.10. Immediate resistance can be found at 111.70 (overnight high 111.665) and 112.00. Total net speculative short JPY bets increased to -JPY 94,400 from -JPY 87,100. Which is the second biggest total currency short against the US Dollar next to the Euro. Likely range today 111.30-111.80. Prefer to sell rallies.

Happy Payrolls Friday and trading all.

Open letter on climate-related financial risks

April 18, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, banque de france, climate change, Climate Financial Risk Forum, Green Finance, Minsky moment, Network for Greening the Financial Services, NGFS

The catastrophic effects of climate change are already visible around the world. From blistering heatwaves in North America to typhoons in south-east Asia and droughts in Africa and Australia, no country or community is immune. These events damage infrastructure and private property, negatively affect health, decrease productivity and destroy wealth. And they are extremely costly: insured losses have risen five-fold in the past three decades. The enormous human and financial costs of climate change are having a devastating effect on our collective wellbeing.

The impact of climate change has compelled governments to act. Catalysed by the Paris agreement, governments around the world are putting policies in place to limit the global rise in temperatures to 2C, and preferably as close to 1.5C as possible. The actions undertaken by individual countries will deliver a collective transition to a low-carbon economy. But this transition brings its own risks. Carbon emissions have to decline by 45% from 2010 levels over the next decade in order to reach net zero by 2050. This requires a massive reallocation of capital. If some companies and industries fail to adjust to this new world, they will fail to exist.

The prime responsibility for climate policy will continue to sit with governments. And the private sector will determine the success of the adjustment. But as financial policymakers and prudential supervisors, we cannot ignore the obvious risks before our eyes.

climate change

That is why 34 central banks and supervisors – representing five continents, half of global greenhouse gas emissions and the supervision of two-thirds of the global systemically important banks and insurers – joined forces in 2017 to create a coalition of the willing: the Network for Greening the Financial System (NGFS).

On Wednesday, this coalition’s first comprehensive report seeks to translate commitments to act on climate-related financial risks into concrete action. The four recommendations in the report provide all central banks, supervisors and the financial community with deliverable goals that will help to ensure a smooth transition to a low-carbon economy. We therefore call on policymakers and the financial sector to do the following.

First, integrate the monitoring of climate-related financial risks into day-to-day supervisory work, financial stability monitoring and board risk management. Supervisors are encouraged to set expectations to ensure financial firms are adequately addressing the financial risks from climate change, including by conducting scenario analysis to assess their strategic resilience to climate change policy. Firms are encouraged to take a long-term, strategic approach to the consideration of these risks, and to embed them into their business-as-usual governance and risk-management frameworks.

Second, lead by example, specifically central banks are encouraged to integrate sustainability into their own portfolio management.

Third, collaborate to bridge the data gaps to enhance the assessment of climate-related risks. Public authorities should share and if possible make publicly available any climate-risk data.

Fourth, build in-house capacity and share knowledge with other stakeholders on management of climate-related financial risks. An important element to achieving effective consideration of climate risks across the financial system is to support internal and external collaboration.

The success of these recommendations relies on two important factors, which lead to two broader calls to action on disclosure and classification of climate-related financial risks. First, to support the market and regulators in adequately assessing the risks and opportunities from climate change, robust and internationally consistent disclosure is vital. The market and policymakers must continue to work together to determine the most decision-useful metrics for climate-related financial disclosures.

Second, the NGFS encourages regulators to develop an adequate classification system to identify which economic activities contribute to the transition to a green and low-carbon economy. This will be particularly valuable in supporting financial actors to make sustainable investment and lending decisions.

If the financial community acts on these recommendations we will be two big steps closer to ensuring an orderly transition to a low-carbon economy. We recognise that the challenges we face are unprecedented, urgent and analytically difficult. The stakes are undoubtedly high, but the commitment of all actors in the financial system to act on these recommendations will help avoid a climate-driven “Minsky moment” – the term we use to refer to a sudden collapse in asset prices.

As long as temperatures and sea levels continue to rise and with them climate-related financial risks, central banks, supervisors and financial institutions will continue to raise the bar to address these climate-related risks and to “green” the financial system. We need collective leadership and action across countries and we need to be ambitious. The NGFS is the core of the response of central banks and supervisors. But climate change is a global problem, which requires global solutions, in which the whole financial sector has a crucial role to play.

Bank Rate maintained at 0.75% – March 2019

March 22, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, Brexit, corporate bond, CPI inflation, EU, EU Withdrawal, European Union, Inflation, Monetary Policy Committee

Shifting expectations about the potential nature and timing of the United Kingdom’s withdrawal from the European Union have continued to generate volatility in UK asset prices, particularly the sterling exchange rate. Brexit uncertainties also continue to weigh on confidence and short-term economic activity, notably business investment. Employment growth has been strong, although survey indicators suggest that the outlook has softened. Most indicators of consumer spending are consistent with ongoing modest growth. As the Committee has previously noted, short-term economic data may provide less of a signal than usual about the medium-term growth outlook.

The Committee’s February Inflation Report projections were conditioned on a smooth adjustment to the average of a range of possible outcomes for the United Kingdom’s eventual trading relationship with the European Union. The Committee continues to judge that, were the economy to develop broadly in line with those projections, an ongoing tightening of monetary policy over the forecast period, at a gradual pace and to a limited extent, would be appropriate to return inflation sustainably to the 2% target at a conventional horizon.

The economic outlook will continue to depend significantly on the nature and timing of EU withdrawal, in particular: the new trading arrangements between the European Union and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond. The appropriate path of monetary policy will depend on the balance of these effects on demand, supply and the exchange rate. The monetary policy response to Brexit, whatever form it takes, will not be automatic and could be in either direction. The MPC judges at this month’s meeting that the current stance of monetary policy is appropriate. The Committee will always act to achieve the 2% inflation target.

First Meeting of the PRA and FCA’s joint Climate Financial Risk Forum

March 16, 2019 by industryspread Leave a Comment Filed Under: Regulatory Annoucements Tagged: Bank of England, CFRF, Climate Financial Risk Forum, Deputy Governor, FCA, Financial Sector, future stability, industry, PRA, UK financial system

On Friday 8 March, the PRA and FCA hosted the first meeting of the Climate Financial Risk Forum (CFRF). The objective of the CFRF is to build capacity and share best practice across financial regulators and industry to advance financial sector responses to the financial risks from climate change.

It brings together senior representatives from across the financial sector, including banks, insurers, and asset managers. The forum is chaired by Sarah Breeden (Executive Director of International Banks Supervision, PRA) and Christopher Woolard (Executive Director of Strategy and Competition, FCA). It will meet three times a year and will report to Sam Woods (CEO of the PRA and Deputy Governor at the Bank of England) and Andrew Bailey (CEO of the FCA).

Climate change and society’s response to it presents financial risks that are relevant to the PRA’s and FCA’s objectives. While these risks may crystallise in full over longer-time horizons, they are becoming apparent now. Firms are enhancing their approaches to managing these risks, but face barriers to implementing the forward-looking, strategic approach necessary to minimise the risks. The CFRF aims to reduce these barriers by developing practical tools and approaches to address climate-related financial risks.

Membership is representative of the UK financial sector, including firms of varying size, business model, and maturity of approach to climate-related risks. The full list of members is as follows:

Banks	Insurers	Asset managers	Other
BNP Paribas	Aviva	Blackrock	Green Finance Institute
HSBC	Legal & General	Hermes	London Stock Exchange Group
JP Morgan	Lloyd’s of London	Invesco
RBS	RSA Insurance Group	Schroders
Yorkshire Building Society	Zurich	Standard Life Aberdeen

The forum will also include observers from trade bodies to represent a broader range of firms and ensure the outputs of the CFRF are communicated to their members.

Andrew Bailey

Andrew Bailey, Chief Executive of the FCA, said:

‘The first forum meeting today was an important step in tackling a major threat to the future stability of the financial system. The FCA and PRA have been working closely together, combining and building on our joint knowledge, to develop an approach which will enhance the UK financial system’s resilience to climate change. The Climate Financial Risk Forum will seek to encourage approaches in the financial sector, managing the financial risks from climate change as well as supporting innovation in green finance.’

Sam Woods

Sam Woods, Deputy Governor and CEO of the PRA, said:

‘Climate change has the potential to create significant financial risks for the firms the PRA regulates. The challenge we face in mitigating these risks is unprecedented, and we need to begin to act now if we are to ensure an orderly transition to a low-carbon economy. The establishment of the Climate Financial Risk Forum will provide a platform through which the PRA, FCA and industry can share experience and build expertise as we begin this work.’

At its first meeting, the forum decided to set up four working groups to focus on risk management, scenario analysis, disclosure, and innovation. Each working group will be chaired by a member of the forum and will meet more frequently than the CFRF, reporting back at each CFRF meeting. The aim is to produce practical guidance on each of the four focus areas. The final outputs will be shared with industry more widely. Membership of the working groups will be wider than the forum to allow them to draw on expertise as necessary, such as from academia and industry.

Notes to editors

Liquidity Facility in Euros (LiFE) – Market Notice

March 6, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Bank of England, CCP, Euros, LiFE, SMF Operating Procedures

This Market Notice describes the operation of the Bank of England’s Liquidity Facility in Euros (LiFE).

An indicative schedule of weekly operations under the LiFE from 13 March 2019 is set out on the Funding schemes and lending in other currencies page. The Bank will continue to monitor market conditions carefully and keep its operations, including their frequency, under review.

Euro sign in ECB

3. The LiFE is subject to the terms of the Sterling Monetary Framework (“SMF”) Documentation as supplemented and amended by the Supplementary Terms for the Liquidity Facility in Euros, also published by the Bank today, and by this Market Notice (together the “Liquidity Facility in Euros Terms”). Participants that enter bids in the operations will be deemed to have accepted the Liquidity Facility in Euros Terms and their SMF Admission Letters will be deemed to be amended to admit them into the LiFE.

4. LiFE operations are open to the following:

a. any Operational Standing Facilities Participant (except CCPs); and
b. any OMO Participant whose Group contains an Operational Standing Facilities Participant.

5. The full range of SMF collateral, comprising Level A, B and C collateral sets, will be eligible for the LiFE.

6. Haircuts for Level A, B and C collateral sets are as provided on the Bank’s website. Haircut add-ons will be applied to securities which are non-euro denominated to allow for currency volatility.

7. LiFE operations will be re-margined separately from other collateralised operations. Margin securities may consist of any securities that are eligible collateral. In accordance with the SMF Operating Procedures, Participants should seek to satisfy a call for additional Eligible Collateral within three hours of the call being made.

8. Collateral concentration limits as set out in the SMF Operating Procedures apply to collateral delivered under LiFE operations. Collateral delivered for LiFE operations will be held in a ‘Euro Repo’ pool, with collateral concentration limits applied separately to those in the main pool.

9. Lists of collateral securities to be checked for eligibility by the Bank ahead of pre-positioning should be submitted to the Bank at the following address: eligible.securities@bankofengland.co.uk. It is a Participant’s responsibility to ensure that collateral securities comply with the Bank’s eligibility criteria.

10. Loan collateral must be pre-positioned in accordance with the SMF Operating Procedures.

11. Participants are encouraged to deliver collateral securities to the Bank ahead of the operation, into their main collateral pool. Loan collateral must be held in the Participant’s Loan Pre-Positioning Pool, or the main collateral pool, before the day of the operation.

12. All LiFE operations will be unlimited fixed rate SMF Advances, as defined in the SMF Documentation.

13. The Bank will conduct LiFE operations each Wednesday. Details of the day’s operation, including the rate applicable for that day’s operation, will be announced at 09:45 London time. Operations will take place at 10:00 London time. The closing time for bids will be 10:15 London time. The results will be announced at 10:45 London time or as soon as possible thereafter.

14. Participants with access to the Bank’s electronic tendering system, Btender, should submit their bids via Btender, although the Bank may at its discretion also accept bids from these Participants by telephone to the Bank’s sterling money market desk. Participants without access to Btender should submit their bids by telephone to the Bank’s sterling money market desk.

15. Participants must state the total amount of funds for which they wish to apply. There will be no maximum bid size.

16. If Btender is unavailable for any reason, an announcement would be made on the Bank’s wire services pages.

17. The minimum bid amount is €5 million and the minimum bid increment is €1 million.

18. Interest will be calculated on an Act/360 money market basis.

19. Settlement of the first operation will take place on 14 March 2019 for maturity on 21 March 2019.

20. Settlement of the subsequent operations will typically take place on a T+1 basis.

21. Participants wishing to bid in an operation must supply the Bank with their SSIs for euro cash settlement as soon as possible, and in advance of the day of settlement. SSIs should be provided using the Data Collection Form. The Bank’s euro cash SSIs are also published on its website.

22. The Bank’s collateral pooling arrangements will apply for this operation. Collateral for LiFE operations will held in a separate ‘Euro Repo’ pool. The Euro Repo pool will be visible in the Collateral Management Portal.

23. The Bank will not advance funds until it has confirmed the eligibility of the collateral received. Participants may deliver securities routinely eligible in the Bank’s Level A, B or C collateral sets. Participants may substitute securities delivered with other eligible collateral subsequently.

24. Participants should ensure that securities to be delivered as collateral have settled by 11:00 London time on the day the operation settles.

25. Securities should be delivered in accordance with the SMF Operating Procedures.

26. The Bank reserves the right to reject any security offered for any reason at any time.

27. Participants may transfer collateral held in the main collateral pool into their Euro Repo pool as required, providing the main collateral pool is not left under-collateralised.

28. Collateral provided must have an adjusted market value that is at least equal to the amount of euro funds allocated, plus interest. Where necessary, valuations are converted to euros using the exchange rates published at 16:00 London time on the previous Business Day. The Bank reserves the right to use other rates at its discretion.

29. On the maturity date of transactions, euro funds should be delivered to the Bank by 11.00 London time. Subject to prior agreement with the Bank, Participants may combine payments to be made or returned on the same day into a single transaction of a net amount.

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First Meeting of the PRA and FCA’s joint Climate Financial Risk Forum

Notes to editors

Liquidity Facility in Euros (LiFE) – Market Notice

Eligible institutions

Eligible collateral

Haircuts and margin arrangements

Concentration limits

Collateral checking

Delivery of collateral

Auction structure

Bidding arrangements

Settlement arrangements

How did you hear about us?

July 2019 meeting

Notes to editors

Eligible institutions

Eligible collateral

Haircuts and margin arrangements

Concentration limits

Collateral checking

Delivery of collateral

Auction structure

Bidding arrangements

Settlement arrangements

How did you hear about us?

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