HMT Proposes Rule Changes Resulting from New Investment Firms Regime
HM Treasury, also known as HMT, published a draft statutory instrument to amend the Financial Services and Markets Act 2000 (PRA-regulated Activities) (Amendment) Order. This amendments in this statutory instrument will be a result of introduction of the Investment Firms Prudential Regime (IFPR). The draft instrument is still in development. The drafting approach, and other technical aspects of the proposal, may change before the final instrument is laid before Parliament. HM Treasury plans to lay this instrument before the UK Parliament prior to the end of 2021. The statutory instrument is expected to come into force on January 01, 2022.
The existing Order allows PRA to choose to designate any investment firm that fulfils two criteria: dealing in investments as principal and being subject to the initial capital requirement of EUR 730,000. The IFPR will make the initial capital requirement of EUR 730,000 obsolete, as it will create new initial capital requirements for investment firms. Therefore, the reference to the initial capital requirement of EUR 730,000 is being removed by the statutory instrument. The statutory instrument makes changes to the Order to allow PRA to continue to designate systemic investment firms after the IFPR is introduced. Article 2(3) of the statutory instrument makes changes, which allow for all investment firms that deal in investments as principal to be eligible for designation by PRA. This does not mean PRA will necessarily designate all of these investment firms. When designating investment firms, PRA will continue to have regard to its statutory objectives, the assets of the person or group, and its Statement of Policy on designation. The statutory instrument also makes minor technical changes, including the following:
- Clarifies the meaning of "FCA controlled function" and "PRA controlled function."
- Removes the requirement for PRA to consult BoE before issuing a new designation statement of policy. PRA and BoE consider this requirement can be deleted as it does not reflect their current structures, because PRA is now a part of BoE.
- Clarifies that, where FCA has given its approval in relation to a particular function, such an approval should be deemed to be given by PRA. This means that the authorized persons do not need to re-apply for approval when a firm they work for becomes designated by PRA.
Related Links
Keywords: Europe, UK, Banking, Securities, Investment Firms, IFPR, Designation Process, Statutory Instrument, Regulatory Capital, FCA, PRA, HM Treasury
Featured Experts
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Trevor Howes
IFRS 17 technical advisor; AXIS actuarial modeling system expert; extensive experience in life insurance and life reinsurance, with focus on modeling, valuation, and financial reporting
Previous Article
FI Issues Regulatory Updates for Banks and Investment FirmsRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.
