Telephone 020 3813 2890 for a free no obligation chat about your regulatory requirements with one of our compliance consultants.

© Compound Growth Limited 2012 - 2018 | Terms of Use

Registered in England and Wales as limited company number 07626537 - Registered Office 120 Pall Mall, London, SW1Y 5EA

We use cookies, if you consent to this use, please continue to browse our site.

Here to help with Regulation and Compliance

Compound Growth

IFPRU & BIPRU: Dear CEO Letter Prudential Regulatory Returns

20th February 2018

Review of Regulatory Reporting Practices Requested by FCA

Yesterday, Andrew Bailey, Chief Executive of the FCA wrote to firms in relation to the Quality of their Prudential Regulatory Returns. In a letter addressed to the Firm’s CEO, Mr Bailey informs that a significant number of firms have been submitting regulatory returns that contain inaccurate and/or incomplete data that then hinders the regulator from using the data contained within the returns.  As a result, the FCA is now calling for CEOs of IFPRU investment Firms and BIPRU firms to review their regulatory reporting practices.

Firms are reminded that “Prudential risk monitoring s a fundamental aspect of a firm’s financial management practices. Poor financial management can be a driver of poor conduct outcomes for consumers. In addition, it can ultimately lead to a firm failure, which can cause harm to consumers and/or markets.”

Which regulatory returns are being referring to?

Largely, the Regulatory Returns that the Dear CEO letter refers to for IFPRU investment firms and BIPRU Firms are the FSA001 Balance Sheet, FSA002 Income Statement as well as the COREP returns (Common Reporting) for IFPRU investment firms  - or in the case of BIPRU Firms the FSA003 Capital Adequacy Returns. Whilst these aforementioned returns are noted in the Dear CEO Letter, firms are also reminded that other regulatory returns may also need to be completed and it is the firms’ responsibility to ensure that all compulsory returns are submitted to the FCA.

The regulator utilises the data contained within these regulatory returns to assess prudential risk and help them to understand the business models, financial positions and risk exposures of a firm.

This data is also used to help identify trends within and across sectors of the industry and it is this information that informs the decisions that the FCA makes, thus it is vital for this to be accurate and complete.

Assessing a Firm’s Risk Management Framework

The information that is completed within these Regulatory Returns also forms an integral part of a firm’s risk management framework. As such, firms are reminded that the quality of the information submitted within their returns reflects upon their firms as the FCA utilise the data submitted in part of their assessment of the quality of a firm’s risk management.

To assist firms with reviewing their data reporting processes, the regulator has indicated some of the most common problems with returns, these being:

• Failure to submit certain returns, for example the FINREP (Financial Reporting) return
• Reporting using incorrect units.
• Not reporting cumulatively (on a year-to-date basis) on the FSA002 Income Statement.
• The total sum of risk exposures across various risk categories (market and credit risk for example) is not calculated correctly, leading to an inaccurate figure for firms’ capital requirements.
• Failure to complete the underlying templates within the COREP submissions - this is often due to an inadequate understanding of the prudential rules.
• Inconsistent completion of COREP returns. European Banking Authority (EBA) validation rules dictate that certain data points submitted across different templates within COREP should show identical values or equal the sum of a number of other values.

Whilst the FCA is aware that many of these errors may appear minor in isolation, when data is aggregated they can materially distort that which is used to analyse a sector or a group of firms.

What Next for Firms?

The Regulator has requested within its Dear CEO Letter that CEOs of IFPRU investment firms and BIPRU firms should now review their firm’s regulatory reporting practices “to ensure that they are fit for purpose, comply with the relevant reporting provisions and produce materially accurate data.”

Firms should now ensure that they review their regulatory reporting processes as soon as possible to ensure that they are reporting data to the regulator correctly. Come 1st October 2018, the Regulator has advised they will be reviewing a sample of firms’ returns and should they find that firms continue to submit materially inaccurate, incomplete and/or poor quality data, then the regulator will have no choice but to consider what will be their next steps to improve the standards of returns.

COREP Support:

We have garnered significant experience in helping firms easily adopt the COREP reporting framework since its inception a few years ago and also have a wealth of experience in all regulatory returns. If you should require any regulatory reporting support or assistance please do not hesitate to contact our experienced  and helpful team.

Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.