HMT Issues Draft Instrument to Amend CRR in UK
HM Treasury, also HMT, published a draft statutory instrument on the Capital Requirements Regulation (Amendment) (EU Exit) Regulations 2021. The draft regulation amends the retained EU law and regulations under section 8 European Union (Withdrawal) Act 2018. The draft regulation will ensure that the on-shored CRR continues to operate effectively for UK investment firms until the introduction of the Investment Firms Prudential Regime, or IFPR. To achieve that, the regulation extends the dates of the provision exempting UK commodities dealers from specific prudential requirements until the Investment Firms Prudential Regime applies to them on January 01, 2022.
The retained Capital Requirements Regulation (CRR) makes provision, through Articles 493 and 498, to exempt commodities dealers from specific prudential requirements. These exemptions relieve commodities dealers of the following obligations:
- To hold regulatory capital equal to at least 8% of total risk exposures
- To calculate and report exposures to any individual counterparty equal to or greater than 10% of a firm’s eligible capital
- A prohibition from incurring exposures of more than 25% of eligible capital or EUR 150 million, whichever is higher, to a counterparty or group of counterparties
EU amended the exemption provisions of CRR for commodities dealers to align with the planned introduction of the EU Investment Firms Regulation on June 26, 2021. Consequently, EU commodities dealers are not required to comply with the provisions of the CRR before the Investment Firms Regulation applies to them. Because of UK onshoring CRR, these EU amendments apply in UK law. However, the UK’s equivalent regime for investment firms and commodities dealers—the Investment Firms Prudential Regime—will not be introduced until January 01, 2022. Without amendment, Articles 493 and 498 of the CRR will require UK commodities dealers to comply with the prudential requirements of CRR between June 26 and December 31, 2021. They would then need to comply with a different prudential regime, the Investment Firms Prudential Regime, from January 01, 2022. Such a development would amount to a significant regulatory burden for these firms. Therefore, HM Treasury that retained EU law does not operate effectively in the UK in this instance and is extending the expiry date for CRR exemptions for UK commodities dealers to align with the introduction of the Investment Firms Prudential Regime in UK.
Related Links
Keywords: Europe, UK, EU, Banking, Securities, Investment Firms, CRR, Basel, Statutory Instrument, IFPR, IFR, Regulatory Capital, 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.
Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
HKMA Updates Transition Milestone for Benchmark Rate ReformsRelated Articles
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
ESMA Publishes 2022 ESEF XBRL Taxonomy and Conformance Suite
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
FCA Sets up ESG Committee, Imposes Penalties, and Issues Other Updates
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
FSB Reports Assess NBFI Sector and Progress on LIBOR Transition
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.
