Shearman & Sterling LLP | FinReg | UK Prudential Regulator Offers Modification of UK Capital Rules Reflecting Changes to Capital Requirements Regulation II
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  • UK Prudential Regulator Offers Modification of UK Capital Rules Reflecting Changes to Capital Requirements Regulation II
    06/10/2019
    The U.K. Prudential Regulation Authority has published a draft modification of its capital rules to correspond with changes made to the Capital Requirements Regulation II that will apply directly in Member States from June 27, 2019. Firms wishing to benefit from the modified rules should apply to the Authorisations Division of the PRA.

    The EU published a series of amendments to CRR II on June 7, 2019. Amongst these changes was an amendment allowing firms to classify instruments as Common Equity Tier 1 where those instruments are subsequent issuances of a form of CET1 instruments for which they have received their national regulator's permission, provided that: (i) the provisions governing the subsequent issuances are substantially the same as those governing the issuances that have already been approved; and (ii) firms have notified their national regulator of those subsequent issuances sufficiently in advance of their classification as CET1 instruments. The amendments to CRR II require certain corresponding amendments to be made to Chapter 7 of the Definition of Capital section of the PRA's Rulebook. The PRA is offering a modification of the relevant rules to firms affected by the changes, and has published a draft direction setting out the detail of the modifications that firms may adhere to.

    The PRA can grant a modification of its rules to firms if compliance with the unmodified rules would be unduly burdensome and the modification would not otherwise conflict with the PRA's objectives. Firms must apply to the PRA for approval to be made subject to the modified rules. The PRA intends to consult on a permanent amendment of Chapter 7 of the PRA Rulebook in due course. Any modification by consent issued for a firm will cease when the Rules are amended.

    View the PRA's draft modification.

    View the PRA's note on the draft modification

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