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    HM Treasury on Prudential Regime for Banks and Investment Firms in UK

    March 11, 2020

    HM Treasury published a policy statement on prudential standards in the Financial Services Bill. The policy statement confirms the intention of the UK government to implement the internationally agreed Basel III banking standards in the UK. The statement also announces that the government will take powers to enable the implementation of updated prudential rules for UK banks and investment firms.

    The key points highlighted in the policy statement include the following:

    • In the UK, previous Basel standards have largely been implemented through the EU's Capital Requirements Regulation (CRR as updated by CRR2) and Capital Requirements Directive (CRDIV as updated by CRD5). Although parts of CRR2 applied from June 2019, a number of provisions are due to apply in the EU from June 2021. As this is after the end of the transition period, these elements will not automatically apply in the UK. HM Treasury, therefore, intends to take powers to enable the implementation of updated prudential rules for banks in UK.
    • Unlike CRR2, which partly applies after the end of the transition period, CRD5 must be transposed into national legislation by December 28, 2020. In line with the commitments of UK under the EU Withdrawal Agreement, the government and PRA intend to transpose CRD5 by this date.
    • Most Basel III revisions are not included in CRR2 and CRD5 and have not yet been legislated for in EU. HM Treasury, therefore, intends to take powers to enable the implementation of these most recent revisions to the Basel standards through the Financial Services Bill, demonstrating the ongoing commitment of government to implementing leading global standards in financial services.
    • EU recently legislated to introduce a more proportionate regime for non-systemic investment firms; this regime will only apply in EU from June 2021, after the transition period. However, this regime will not automatically apply in the UK. HM Treasury, therefore, intends to take powers to enable the introduction of an updated prudential regime for investment firms in UK.

    As next steps, public consultations will be launched on the implementation of the Basel standard, on CRR2 provisions and on the prudential regime for investment firms in due course. The Financial Services Regulators—BoE, PRA, and FCA—will also set out their own plans for consultation and stakeholder engagement on amendments to their rulebooks in due course.

     

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    Keywords: Europe, UK, Banking, Securities, Basel III, CRR2, CRD5, CRD IV, Financial Services Bill, HM Treasury, IFR, IFD, Proportionality, BoE, PRA, FCA

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