UK Government Publishes Statutory Instrument on CRR and IFPR Changes
The UK government published the Statutory Instrument titled "The Financial Services and Markets Act 2000 (Consequential Amendments of References to Rules) Regulations 2021," which comes into force from January 01, 2022. This instrument makes consequential amendments to definitions in legislation that refer to, and include, rules made by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to update the prudential regime for banks and investment firms in the UK. The changes to rules made by PRA and FCA stem from the use of powers taken by Her Majesty's (HM) Treasury through the Financial Services Act 2021.
The Financial Services Act enables the implementation of the remaining Basel 3 standards by giving powers to HM Treasury to revoke provisions of the Capital Requirements Regulation (CRR). Following repeal, PRA can write rules on the subject areas deleted. The Financial Services Act also introduced a bespoke prudential regime for non-systemic investment firms—the Investment Firms Prudential Regime or IFPR—by placing an obligation on, and providing certain powers for, the FCA to introduce prudential rules for investment firms (Part 9C rules). Overall, the Financial Services Act powers enable the implementation of the IFPR and remaining aspects of the Third Basel Accord (Basel 3 standards). PRA has made “CRR rules” (as defined in section 144A of the Financial Services and Markets Act 2000) that implement the remaining Basel 3 standards. FCA has made “Part 9C rules” (as defined in section 143F of the Financial Services and Markets Act 2000) to implement the IFPR. The purpose of this instrument is to update references in legislation to the rules made by the regulators as they apply on January 01, 2022.
This instrument will amend the definition of “Directive 2013/36/EU UK law” within certain pieces of legislation. “Directive 2013/36/EU UK law” is defined as meaning “the law of the United Kingdom which was relied on immediately before Implementation Period completion day to implement the capital requirements directive and its implementing measures as it has effect on IP [Implementation Period] completion day, in the case of rules made by FCA or PRA under this Act, and as amended from time to time, in all other cases.” This instrument also updates the definitions of the Collective Investment Schemes sourcebook, the FCA Handbook, and the PRA Rulebook, where they appear in the statute book to ensure that those definitions capture CRR rules and Part 9C rules made as of January 01, 2022. The amendments substitute the reference to "IP completion day," in the context of rules made by FCA or PRA. This will ensure that the definitions capture regulator rules as they have effect on January 01, 2022 (rather than December 31, 2020). This is because, as a consequence of PRA and FCA making CRR and Part 9C rules, respectively, they have had to amend some of their rules which implemented the Capital Requirements Directive.
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Keywords: Europe, UK, Banking, Securities, Investment Firms, CRR, IFPR, Basel, Regulatory Capital, Statutory Instrument, PRA, FCA, HM Treasury, UK Government
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