HM Treasury on Prudential Regime for Banks and Investment Firms in UK
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.
Related Links
Keywords: Europe, UK, Banking, Securities, Basel III, CRR2, CRD5, CRD IV, Financial Services Bill, HM Treasury, IFR, IFD, Proportionality, BoE, PRA, FCA
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
RBI Proposes Revisions to Regulations for Housing Finance CompaniesRelated Articles
PRA Consults on Implementation of Certain Provisions of CRD5
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA Report Identifies Key Financial Stability Risks for Insurers
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA Publishes Risk Dashboard for First Quarter of 2020
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA Issues Updates on Stress Test Exercise for Banks in EU
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA Proposes Guidance Related to Matching Adjustment under Solvency II
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS Issues Guidance on Dividend Distributions by Banks
MAS published a statement guidance on dividend distribution by banks.
APRA Updates Guidance on Capital Management for Banks
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB Report Reviews Macro-Prudential Framework and Tools in Germany
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA Urges Firms to Finalize Preparations for End of Brexit Transition
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB on Operational Continuity in Resolution and FMI Contingency Plans
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.
