BoE on Application of Transitional Power to CRD5 and BRRD2 Legislation
BoE published a statement on the application of the temporary transitional power to CRD5 and BRRD2 derived legislation. The statement confirms that no additional exceptions from the application of the transitional power are expected to be required in relation to onshoring changes to new rules and legislation implementing the fifth Capital Requirements Directive (CRD5) and the revised Banking Resolution and Recovery Directive (BRRD2). BoE has added guidance documents that support the draft transitional directions published as part of the consultation paper CP13/20 on changes before the end of the transition period. The documents provide guidance on transitional direction in relation to the PRA Rulebook, the Capital Requirements Regulation, the Solvency II regime, the Securitization Regulation, and the BRRD.
BoE and PRA have not identified the necessity of any further exceptions to its transitional directions as a result of onshoring amendments to the CRD5 and BRRD2 derived legislation. This means that transitional relief will apply to a small number of “relevant obligations” that are changed by onshoring amendments made to the CRD5 and BRRD2 derived legislation at the end of the transition period. The temporary transitional power, however, cannot apply to changes being made to the primary or secondary legislation to implement a Directive in domestic law. These changes are not onshoring amendments made under section 8 of the Withdrawal Act to which the temporary transitional power can apply. Firms must, therefore, ensure that they are ready to comply with changes to domestic law and PRA rules, which are being made to implement the CRD5 and the BRRD2 to the extent that these are relevant to firms.
In relation to the BRRD2, HM Treasury is making changes to primary legislation that will affect the existing PRA regime for Contractual Recognition of Bail-in and Stay in Resolution rules. Most of the elements of the Statutory Instrument that are relevant to Contractual Recognition of Bail-in and Stay in Resolution rules will come into force on December 28, 2020 but will subsequently cease to have effect from the end of the transition period. As a result of this process, the temporary transitional power will be of limited relevance to BRRD2. PRA has previously communicated that it does not intend to grant transitional relief in respect of Contractual Recognition of Bail-in and Stay in Resolution rules, except in relation to phase two liabilities as referenced in relation to Contractual Recognition of Bail-in rules. PRA intends that this policy outcome will remain the same irrespective of any changes to PRA rules made due to BRRD2.
Keywords: Europe, UK, Banking, Insurance, CRD5, BRRD2, Brexit Transition, Temporary Transitional Power, CRR, PRA Rulebook, Solvency II, Contractual Recognition, Bail-In, Resolution Framework, PRA, BoE
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