Our response to the PRA consultation on disclosure of encumbrance

We are pleased to submit a brief response to this consultation.

We agree with the broad outline of policy underlying the specific proposals, as set out particularly in paragraph 1.10.  As the consultation states, “disclosures enabling market participants  to deduce the use of Bank of England liquidity assistance may make that assistance less effective and harm the economy by undermining confidence”. The undesirability of disclosing, whether directly or indirectly, the use of the Bank’s liquidity assistance was a lesson learned (again) during the Northern Rock crisis.

The PRA’s ability to mitigate this problem is limited by the EBA Guidelines. We think the PRA’s proposals make full and appropriate use of the flexibility afforded by the EBA, and support the thresholds set out in the CP. The Template B waiver should, given those thresholds, be available to our members.

The practical arrangements are also suitably streamlined – in particular, the waiver is to be general, applying to all firms meeting the criteria, and will not need to be individually applied for. We support this approach.

About us

The Building Societies Association represents all 44 UK building societies. Building societies have total assets of over £330 billion and together with their subsidiaries, hold residential mortgages of over £240 billion, 19% of the total outstanding in the UK. They hold over £240 billion of retail deposits, accounting for 19% of all such deposits in the UK. Building societies account for about 28% of all cash ISA balances. They employ approximately 39,000 full and part-time staff and operate through approximately 1,550 branches.

Members and associates may be interested on the policy brief on asset encumbrance.