Featured Product

    HM Treasury Outlines Approach to Implement Prudential Regimes in UK

    June 23, 2020

    The HM Treasury has published statements setting out the intended approach for implementation of a range of key regulatory reforms in the financial sector in UK. One policy statement by the HM Treasury provides details on the legislative approach for prudential standards in the Financial Services Bill, which mainly addresses the Investment Firms Prudential Regime (IFPR) and the prudential regime for banks to enable the implementation of Basel 3.1, which is a UK version of the second Capital Requirements Regulation (CRR2). The statement also provides detail on the way government will tailor these prudential regimes to the specifics of the UK market. Additionally, as mentioned in a written statement by Rishi Sunak, the Chancellor of the Exchequer, the government also plans to bring forward a review of certain features of Solvency II to ensure that the regime is tailored to take account of the structural features of the insurance sector in UK.

    The UK will endeavor to introduce the IFPR and the updated prudential standards for credit institutions (those contained in CRR2 for EU) by Summer 2021, broadly consistent with the applicability date of the EU regimes for investment firms and credit institutions (IFR/IFD and CRR2). However, as the frameworks for both IFPR and the updated prudential standards for credit institutions are being introduced through the Financial Services Bill, the specific timing for introduction of these regimes will be dependent on the passage of this Bill through Parliament. HM Treasury will work toward the implementation of Basel 3.1 standards, with the UK implementation timetable being consistent with the one-year delay announced by BCBS, on March 27, amid the COVID-19 crisis. The policy statement from HM Treasury outlines planned changes to the existing legislation to enable implementation of the new prudential regime for credit institutions. As part of this, the Financial Services Bill will delete articles of the retained CRR, where appropriate to do so, and provide HM Treasury with a power to delete further elements of CRR using secondary legislation where additional flexibility may be required (For example, with regard to Basel 3.1). 

    As announced in the policy statement of HM Treasury, during the Transition Period and under the terms of the Withdrawal Agreement, the government will implement EU legislation that requires transposition before the end of 2020. It is the intention of the government and the PRA to transpose Fifth Capital Requirements Directive (CRD5) by December 28, 2020, in line with commitments under the EU Withdrawal Agreement. A consultation on the transposition of CRD5 will take place in July. HM Treasury intends that CRR2/CRD5, and any subsequent updates to the banking regime, should not apply to FCA-regulated investment firms, which should continue to comply with the relevant current regulation until the IFPR is in place. HM Treasury intends to make the necessary legal clarifications through transposition. To minimize uncertainty, the government and the regulators propose to introduce the new Investment Firms Prudential Regime (IFPR) and updated rules for credit institutions in line with the intended outcomes of the EU Investment Firms Regulation and Directive as well as the second Capital Requirements Regulation respectively. For the IFPR, the policy statement further clarifies that the government and PRA do not intend to require PRA-designated investment firms to re-authorize as credit institutions, unlike the EU regime. It also clarifies that the government does not intend to require FCA-regulated investment firms to comply with the requirements of CRD5 in the period until the new IFPR applies. 

    Finally, with respect to Solvency II, the government plans to bring forward a review of certain features of this regime to ensure that it is properly tailored to take account of the structural features of the UK insurance sector. The review will consider areas that have been the subject of long-standing discussion while the UK was a member state, some of which may also form part of the EU’s intended review. These will include, but are not limited to, the risk margin, the matching adjustment, the operation of internal models, and reporting requirements for insurers. On this, the government expects to publish a Call for Evidence in Autumn 2020.

     

    Related Links

    Keywords: Europe, EU, UK, Banking, Insurance, Securities, CRR2, VRD5, Basel, Financial Services Bill, Solvency II, IFPR, PRA, FCA

    Featured Experts
    Related Articles
    News

    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.

    April 08, 2021 WebPage Regulatory News
    News

    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.

    April 08, 2021 WebPage Regulatory News
    News

    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.

    April 08, 2021 WebPage Regulatory News
    News

    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.

    April 07, 2021 WebPage Regulatory News
    News

    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).

    April 07, 2021 WebPage Regulatory News
    News

    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.

    April 07, 2021 WebPage Regulatory News
    News

    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.

    April 06, 2021 WebPage Regulatory News
    News

    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.

    April 06, 2021 WebPage Regulatory News
    News

    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.

    April 06, 2021 WebPage Regulatory News
    News

    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).

    April 06, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6826