UK Authorities Update Rules and Guidance for End of Brexit Transition
BoE and PRA updated, on their respective webpages, information on their approaches to the temporary transitional power (TTP) related to the withdrawal of UK from EU. BoE and PRA also published general guidance on the transitional directions; the guidance supports the draft transitional directions published as part of the consultation paper CP13/20 on proposed changes to certain Exit Instruments before the end of the Brexit transition period. Additionally, BoE made available a checklist of actions to avoid disruption (stemming from cross-border activities) to end-users of financial services at the end of the transition period on December 31, 2020. Finally, with regard to the Brexit transition, FCA updated its Handbook with the rules that will apply at the end of the transition period, also setting out details on how it intends to use the temporary transitional power.
The general guidance on the transitional directions of BoE and PRA explains the general effect of the transitional direction of BoE and PRA, which is to delay onshoring changes that fall in the remit of BoE and PRA until March 31, 2022. The guidance also explains how firms and financial market infrastructure entities should interpret the regulatory obligations that apply immediately before the end of the transition period. The guidance notes exceptions to the general approach of BoE and PRA and the specific approach of PRA to the use of the transitional power for former passporting firms, in particular firms in the temporary permissions regime and Supervised Run-off Regime. Firms should have regard to these guidance while the transitional relief granted under the direction is in effect. The direction will come into effect at the end of the transition period and will apply until March 31, 2022, unless BoE and PRA decide to change this in future.
The temporary transitional power allows the financial services regulators of UK to delay or phase-in onshoring changes to the UK regulatory requirements arising at the end of the transition period. BoE, PRA, and FCA intend to use the temporary transitional power to provide broad transitional relief, with key exceptions, for 15 months after the end of the transition period, until March 31, 2022 (the temporary transitional power period). Where the temporary transitional power applies, firms and financial market infrastructure entities should use the temporary transitional power period to prepare for full compliance with their onshored regulatory obligations from April 01, 2022. BoE and PRA have identified certain key areas for which transitional relief is not available, including contractual recognition of bail-in rules, contractual stays, and Financial Services Compensation Scheme protection. Similarly, in certain key areas, FCA expects firms and other regulated persons to be preparing to comply with changed obligations ready for December 31, 2020. These areas include Securities Financing Transaction Regulation (SFTR) reporting obligations, use of credit ratings for regulatory purposes, securitization, and mortgage lending after the transition period against land in the European Economic Area.
Related Links
- BoE and PRA Notification
- FCA Press Release
- BoE TTP Webpage
- FCA TTP Webpage
- Guidance on Transitional Direction of BoE (PDF)
- Guidance on Transitional Direction of PRA (PDF)
- Checklist on Risks of Disruption (PDF)
Keywords: Europe, UK, Banking, Insurance, Securities, Brexit, Temporary Transitional Power, Transitional Direction, Securitization, PRA, BoE, FCA
Previous Article
SRB Launches Resolution Reporting Data Collection Exercise for 2021Related Articles
EBA Issues Erratum for Phase 2 Package of Reporting Framework 3.0
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
EBA Updates Lists of Entities for Use in Capital Calculations under SA
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS Amends Notice on Related Party Transactions of Banks
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB Amends Guideline on Euro Short-Term Rate
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA Consults on Standards Related to FRTB-SA
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA Proposes Rules Related to IRB Approach for Credit Risk
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
BoE Outlines Regulatory Treatment of Recovery Loan Scheme of UK
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB Addresses G20 on COVID Measures, TBTF Reforms, and Climate Risks
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI Unwinds Temporary Increase to Covered Bond Limit for Banks
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
EU Amends CRR and Securitization Regulation in Response to Pandemic
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
