The PRA (Prudential Regulator) sent a “Dear CEO” letter to all international banks active in the UK, detailing its priorities (and therefore areas of particular attention for the banks) for 2022.

It issued a similar letter to Insurance companies.

The main preoccupations for the PRA as far as banks are concerned:

1. Financial resilience – in a context of the economy recovering from COVID-19 and some broad sectorial changes (therefore evolving credit risks)

2. Operational risk and resilience – again, influenced by COVID and potential staffing or continuity issues for critical services

3. Financial risks arising from climate change – two sentences captured our attention on this topic:

  • We have observed that most firms are focused on the business opportunities presented by climate change, and remind firms that climate change also presents an increasing business risk that is foreseeable and requires action now.
  • We expect firms to take a forwardlooking, strategic and ambitious approach to managing climaterelated financial risks.

4. Diversity & Inclusion – diversity and inclusion in turn bringing better resilience.

5. Riskfree rate transition – the final “death” of Libor.

6. Other areas of supervisory focus: Data. With a clear message to threaten banks of strong action (using Section 166) against laggards:

  • the PRA expects all firms to continue to take action to ensure the integrity of their returns. The PRA is expanding its programme of using skilled persons reviews (under Section 166 of the Financial Services and Markets Act) to verify the accuracy of regulatory returns.

PRA Dear CEO Letter to International Banks: