BoE Proposes Changes to EU Exit Instruments Before Brexit Transition
In the jointly published consultation paper CP13/20, BoE and PRA proposed changes to certain Exit Instruments before the end of the Brexit transition period. Further updates and amendments are needed to the EU Exit Instruments of BoE and PRA as a consequence of the transition period and the delay in the coming into force of these instruments from exit day to IP completion day. The transition period ends on December 31, 2020, which is defined in the UK law as "IP completion day." Also, additional EU legislation that applies before the IP completion day requires further EU Exit Instruments to be made. BoE and PRA are requesting responses to the consultation by November 17, 2020 and these responses will be shared with FCA also. BoE and PRA expect the proposals in CP13/20 to take effect on December 31, 2020.
Section A of CP13/20 contains an update on BoE and PRA’s intended use of the temporary transitional power provided for in the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019. Appendices 1 and 2 of CP13/20 provide draft PRA and BoE transitional direction, respectively. Section B of CP13/20 contains BoE and PRA consultation with proposals to fix deficiencies arising from Brexit and make consequential changes before the end of the transition period. Section B is split into three parts:
- Part 1 sets out BoE and PRA proposals in relation to consequential changes required to existing EU Exit Instruments to update references to exit day and a small number of changes in light of adaptations to relevant EU legislation made by the European Economic Area Agreement. Appendix 3 of CP13/20 contains draft amendments to SS2/19 on approach to interpreting reporting and disclosure requirements and regulatory transactions forms after Brexit.
- Part 2 sets out proposals of PRA in relation to the PRA Rulebook and Binding Technical Standards that will, or are expected to, be retained in UK law. Appendix 4 contains draft PRA Rulebook (EU Exit) Instrument 2020 and Appendix 5 contains PRA Technical Standards (Consequential Amendments) (EU Exit) Instrument 2020. Appendices 6, 7, 8, and 9 provide Technical Standards (EU Exit) Instruments 2020 related to Capital Requirements, Solvency II Directive, European Market Infrastructure (No. 5), and Securitization.
- Part 3 sets out proposals of BoE in relation to the Binding Technical Standards that will be retained in the UK law. Appendix 10 contains Bank Technical Standards (Consequential Amendments) (EU Exit) Instrument 2020. Appendices 11, 12, and 13 contain Technical Standards (EU Exit) Instruments 2020 related to Bank Recovery and Resolution, Central Securities Depositories, and European Market Infrastructure (No. 4)
CP13/20 is relevant to all firms authorized and regulated by PRA, including those that expect to have a deemed permission under the temporary permissions regime or Financial Services Contracts Regime (FSCR), or that seek to apply for PRA authorization in the future. It is also relevant to financial market infrastructures recognized and supervised by BoE, including the central counterparties that expect to have a deemed recognition under the temporary recognition regime.
In addition, PRA published a report on the use of sub-delegated powers by BoE and PRA under the EU (Withdrawal) Act 2018. HM Treasury laid this report in Parliament on September 17. The European Union (Withdrawal) Act 2018 (EUWA 2018) requires BoE and PRA to report to Parliament annually if it exercises relevant sub-delegated powers. The relevant powers for these purposes are the powers delegated to BoE and PRA to make changes to the PRA Handbook and BoE and PRA Binding Technical Standards and make directions under the temporary transitional power to help firms adjust in light of the exit of UK from EU. This report relates to the use of the powers by BoE and PRA in the annual reporting year ending February 29, 2020.
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Comment Due Date: November 17, 2020
Effective Date (Proposed): December 31, 2020
Keywords: Europe, UK, Banking, Insurance, Brexit, Exit Instruments, CRR, Solvency II, Securitization, Binding Technical Standards, PRA Rulebook, Reporting, HM Treasury, PRA, BoE
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