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  • UK Prudential Regulator Consults on UK Implementation of CRD V

    The U.K. Prudential Regulation Authority has published a consultation on proposed changes to the PRA rules to implement the fifth Capital Requirements Directive. CRD V came into force in July 2019 and EU Member States are required to implement the majority of its provisions by December 28, 2020. As this is prior to the end of the U.K.'s Brexit transition period, the U.K. must transpose those provisions of CRD V that are applicable before the end of the transition period into U.K. law under the terms of the EU-U.K. Withdrawal Agreement. Certain of those provisions (including those relating to capital buffers and holding company approval and supervision) must be implemented in the U.K. by HM Treasury. Those provisions are the subject of a separate consultation by HM Treasury consultation (published on July 16, 2020). HM Treasury has delegated responsibility for implementation of the remaining provisions to the PRA.

    The PRA's consultation focuses on its proposed implementation of the following aspects of CRD V:

    (i) Pillar 2 requirements in relation to firms' internal capital assessments, supervisory review of those assessments and additional capital requirements and related guidance;

    (ii) remuneration arrangements, including for material risk takers; the PRA will also consider any further changes required in respect of gender neutral remuneration policies once HM Treasury concludes its separate consultation on the transposition of these requirements;

    (iii) requirements for intermediate parent undertakings; the application date of the CRD V obligation for third-country firms to establish an IPU differs depending on the size of the banking group; for those groups that are subject to rules that come into force after January 1, 2021, the U.K. will not implement the IPU requirement; for those groups that are subject to rules that come into force before January 1, 2021, the PRA will implement the IPU requirement from December 29, 2020, but will remove the IPU requirement after December 31, 2020 when the Brexit transition period ends;

    (iv) governance, including implementation of policies to evaluate operational risk exposures arising from outsourcing and the requirement to provide data on loans made to management and related parties; and

    (v) reporting of information by third-country branches.

    Responses to the PRA's consultation should be submitted by September 30, 2020. The PRA will separately consult on the implementation of further aspects of CRD V in Autumn 2020.

    View details of the PRA's consultation on CRD V.

    View details of HM Treasury's consultation.

    You may like to view details of our client note, The New EU Law On Intermediate Holding Companies For Third-Country Banking Groups.

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