Featured Product

    HM Treasury Publishes Response to Proposal on CRD5 Transposition

    October 15, 2020

    HM Treasury published the government response to the feedback received on the consultation for updating the prudential regime of UK before the end of the Brexit transition period. The government has laid the secondary legislation—entitled "The Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020"—implementing the relevant CRD5 provisions before Parliament on October 15, 2020, after dialog with BoE, PRA, and FCA as well as after considering feedback to the consultation. The government will implement EU legislation that applies before the end of 2020 and this includes the transposition of CRD5 into the national law by December 28, 2020. The government is expected to publish a consultation in Autumn 2020 toward the implementation of certain provisions discussed in this response.

    The government ran a consultation on its proposed approach to implementation of the Capital Requirements Directive 5 (CRD5) from July 16, 2020 to August 20, 2020. This Directive updates the prudential legislative framework that applies to banks and systemic investment firms. The consultation outlined proposals of the government for new requirements on financial holding companies, changes to the macro-prudential toolkit, and the intention to exempt non-systemic investment firms from the scope of CRD5, and sought comments. The government received eight responses from a mixture of industry bodies and financial institutions, including BNY Mellon, Building Society Association, The Investment Association, and UK Finance. The responses broadly highlighted agreement with the proposed approach of the government but noted a few areas that required clarification or highlighted specific complexities. These areas related to the macro-prudential updates and the holding company approval regime. The following are the key highlights of the government response: 

    • PRA and Financial Policy Committee will be given powers to set an other systemically important institution, or O-SII, buffer, to require ring-fenced banks and large building societies to hold a sufficient level of capital. The legislation will also make necessary updates to the definition of Other and Globally Systemically Important Institutions to reflect changes set out in the Directive. PRA plans to consult on the implementation of these provisions in Autumn of 2020.  
    • PRA will be given a power over the CRD5 systemic risk buffer and will have the ability to recognize third-country systemic risk buffers. PRA intends to explain its approach to the revised CRD5 systemic risk buffer in its Autumn consultation. FPC and PRA will continue to be able to apply macro-prudential Sectoral Capital Requirements.
    • A bespoke holding company approval regime will be created for parent holding companies and other holding companies required to comply with the Capital Requirements Directive or the Capital Requirements Regulation (CRR) on a consolidated or sub-consolidated basis. The government will legislate to provide PRA with the enforcement powers required to supervise holding companies, as required for transposition of CRD5. Other holding companies that are not the ultimate parent or responsible for sub-consolidated requirements will not be subject to approval.
    • PRA will also be given the power to remove members of management boards where an individual is no longer of sufficiently good repute, no longer possesses sufficient knowledge, skills, experience, honesty, integrity, or independence of mind, or is no longer able to commit sufficient time.
    • The Senior Managers and Certification Regime, or SMCR, will not be extended as part of the legislation.

    Finally, in its response, PRA noted that it does consider climate risks as part of its Supervisory Review and Evaluation Process (SREP) and that its approach to SREP is covered in the supervisory statement SS3/19.

     

    Related Links

    Keywords: Europe, UK, Banking, CRD5 Transposition, Regulatory Capital, Basel, Brexit, SM&CR, CRD5, Responses to Consultation, HM Treasury

    Featured Experts
    Related Articles
    News

    BIS Quarterly Review Discusses Developments in Fintech and ESG Space

    BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.

    September 20, 2021 WebPage Regulatory News
    News

    BCBS to Consult on Supervisory Practices for Climate Risks by Year-End

    The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards

    September 20, 2021 WebPage Regulatory News
    News

    OCC Identifies Operational Risk Deficiencies in MUFG Union Bank

    The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.

    September 20, 2021 WebPage Regulatory News
    News

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News
    News

    ECB to Consider Climate Risks When Reviewing Collateral Framework

    In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.

    September 17, 2021 WebPage Regulatory News
    News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News
    News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News
    News

    ACPR Publishes Corrective Version of RUBA Taxonomy

    The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.

    September 15, 2021 WebPage Regulatory News
    News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News
    News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7487