BoE: ‘Firms should expect increased engagement with us’

In a letter from Threadneedle Street’s regulatory arm the Prudential Regulation Authority (PRA) outlining its list of priorities to those it regulates, it has said firms should ensure their credit risk management practices are “robust, portfolios are closely monitored, customer support and collections arrangements are appropriately scaled” and expected credit loss provisions are “recognised in a timely manner”.  

As part of its assessment of firms’ credit risk management, it has said it will focus on traditionally “higher risk” areas. These include retail credit card portfolios, unsecured personal loans, leveraged lending, commercial real estate, buy-to-let, and lending to small and medium-sized enterprises.  

It added: “We will also look at firms’ early warning indicator frameworks given many credit risk metrics are backward looking. Firms should expect increased engagement with us, including targeted requests for enhanced data and analysis.” 

The PRA also expects companies to take “proactive steps” to assess the implications of the evolving economic outlook on the sustainability of their business models, including consideration of broader structural changes to the banking sector such as the evolution of new financial technology and competition.  

Additionally, it’s engaging with firms on which data it collects part of its Banking Data Review and will continue consulting firms on the long-term reforms it’s looking to make throughout 2023.