3

PRA expectations for firms affected by a MTE

3.1

The PRA expects firms to consider in advance the possible implications of a MTE on their business, including what steps might reasonably be taken in advance to enable them to respond appropriately and meet their regulatory obligations.

3.2

Where a firm’s business is such that a MTE and its potential consequences could have a significant impact on the firm’s financial position or future business plans, the PRA expects firms to consider their approach to MTEs particularly with regard to risk management, capital management and financing, governance, and reporting and disclosure. The following sections set out the PRA’s expectations in these areas in more detail.

3.3

The PRA recognises that there is a limit to how much detailed planning can be undertaken for a future event whose cause and likely consequences are uncertain, and that firms will need to preserve appropriate flexibility within their plans to respond appropriately to circumstances at the time. The PRA’s expectations in relation to firms’ planning for a MTE focus on the general considerations which might arise in dealing with such an event, rather than specific detailed planning for a particular MTE scenario.

3.4

The PRA recognises that firms are likely to have other information and analysis which might be relevant to their planning for a MTE, such as information contained within firms’ own risk and solvency assessments (ORSAs), business continuity plans, or stress testing analysis. The PRA expects firms to take this other information and analysis into account when considering how to assess and plan for a MTE, and to consider for themselves whether and how best to incorporate any MTE analysis or plans into any existing material (or vice versa). The PRA recognises that firms may wish to cross-refer to other relevant material rather than duplicate analysis already undertaken.

3.5

The PRA is open to meeting with firms to discuss their MTE planning in more detail and firms should contact their usual supervision team to arrange such meetings.