Treasury has provided some detail on the legislative approach it will take on prudential standards in the Financial Services Bill. The statement goes alongside the FCA discussion paper on the prudential regime for investment firms – and Treasury will be including this in its Bill as well as updating prudential rules for banks.
For banks, as Treasury has previously notified, some parts of CRR2 will apply in the EU from June 2021, that is after the end of the Transitional Period, while CRDV must be implemented by 28 December (ie before the end of the Transitional Period). Additionally, there are the Basel 3.1 standards, which have not yet been included in any EU or UK legislation.
Treasury will use the flexible and proportionate approach it is committed to by delegating responsibility for implementation of firm requirements to the financial regulators, and will back this up with an enhanced accountability framework. So the vast majority of the banking regime will be in PRA Rules, as the vast majority of the investment firms regime will be in FCA rules.
Treasury plans to ensure the appropriate accountability by creating additional requirements on what the regulators must consider, and will ensure the wider objectives of the government and Parliament are taken into account.
In terms of CRR2 and Basel 3.1, Treasury says the FS Bill will delete articles of the retained CRR where appropriate and have a power to delete further parts where necessary. It will also disapply the retained CRR for FCA-regulated investment firms and amend the retained MiFIR to update the equivalence provisions for third country investment firms.
It plans to introduce the new regimes by Summer 2021, and will work to the one-year delayed application of the Basel 3.1 standards for 1 January 2023.