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    PRA Finalizes Exit Instrument and Guidance Before Brexit

    December 28, 2020

    PRA published the policy statement PS30/20, which contains the final PRA Rulebook (EU Exit) Instrument, the PRA transitional direction, and the related guidance documents on Capital Requirements Regulation or CRR, Solvency II, Securitization Regulation, and PRA Rulebook. On December 18, 2020, the PRA Rulebook (EU Exit) Instrument, PRA transitional direction, and related guidance documents were published as “near-final” as part of PS27/20. Following the making of the PRA rules implementing the fifth Capital Requirements Directive (CRD5), PRA has finalized the Rulebook (EU Exit) Instrument, the transitional direction, and the related guidance documents. PRA has not made any changes to the materials that were published as part of PS27/20.

    PS30/20 is relevant to all firms authorized and regulated by PRA. Some of the changes are relevant to firms authorized and regulated by FCA and to the Financial Services Compensation Scheme (FSCS). PS30/20, and the accompanying materials, may also be relevant to firms applying to PRA or FCA for authorization. PS30/20 includes the following appendices:

    • Appendix 1 sets out that PRA Rulebook (EU Exit) Instrument has been made pursuant to the requirements in the Financial Regulators’ Powers (Technical Standards etc.) (Amendment etc.) (EU Exit) Regulations 2018. PRA has also made certain parts of the PRA Rulebook (EU Exit) Instrument, relating to FSCS levies and administrative fees, under Financial Services and Markets Act (FSMA) powers. Most provisions of the PRA Rulebook (EU Exit) Instrument will commence on IP completion day, although a small number of provisions will take effect at different times. The transition period ends on December 31, 2020, which is defined in the UK law as "IP completion day." 
    • Appendix 2 states that PRA transitional direction has been made pursuant to the requirements in the FSMA 2000 (Amendment) (EU Exit) Regulations 2019. This direction, which shall come into force on IP completion day, shall apply until March 31, 2022 unless otherwise stated in this direction or unless varied or revoked beforehand. 
    • Appendix 3 provides general guidance on the PRA transitional direction that explains the general effect of the transitional direction of PRA, which is to generally delay onshoring changes which fall within the remit of the PRA until March 31, 2022. It also explains how firms should interpret their regulatory obligations which applied immediately before the end of the transition period.
    • Appendix 4 provides guidance on PRA transitional direction in relation to firms’ obligations in the context of CRR and related onshoring instruments.
    • Appendix 5 provides guidance on the transitional direction in relation to firms’ obligations in the context of the Solvency II Regulation and related Binding Technical Standards.
    • Appendix 6 and 7 provides guidance on the transitional direction in relation to firms’ obligations in the context of the Securitization (Amendment) (EU Exit) Regulations 2019 and PRA Rulebook, respectively.

    In addition, FCA has published the final onshoring instruments, related guidance, and Temporary Transitional Power directions that will apply at the end of the Brexit transition period. To prepare for the end of the transition period, FCA has made further EU exit-related changes to its Handbook and Binding Technical Standards, for which, in some cases, it shares responsibility with PRA or BoE. These changes ensure that a functioning regulatory and legal framework for financial services continues to be in place after the transition period. The Temporary Transitional Power will be applied on a broad basis from the end of the transition period until March 31, 2022, but there are some areas where the Temporary Transitional Power will not apply.

     

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    Effective Date: December 31, 2020

    Keywords: Europe, UK, Banking, Insurance, Securities, Brexit, Exit Instruments, CRR, Solvency II, Securitization, Binding Technical Standards, PRA Rulebook, PRA, FCA

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