UK Government Publishes Guidance on Proposed Legislation to Onshore EU Legislation on Financial Conglomerates and Groups
10/22/2018HM Treasury has published explanatory information on the draft Financial Conglomerates and Other Financial Groups (Amendment) (EU Exit) Regulations 2018, which it intends to publish in due course. The draft Regulations will amend deficiencies in the U.K. legislation that implemented the EU Financial Conglomerates Directive. FICOD sets out specific solvency requirements designed to prevent different entities in a conglomerate from using the same capital more than once as a buffer against risk. The Directive also sets out requirements for management controls, risk management and for information sharing between relevant regulators of conglomerates. In the U.K., FICOD has been implemented by the Financial Conglomerates and Other Financial Groups Regulations 2004, as well as through provisions in regulatory rulebooks.
The explanatory information explains that the draft Regulations will amend several deficiencies to ensure the U.K.'s FICOR Regulations remain operative in a U.K.-only context.
- The definition of a financial conglomerate will be amended such that at least one entity in the group must be located within the U.K., rather than the EEA (as currently), while the other(s) may be located anywhere in the world. This is in line with the U.K.'s general approach of treating the EU as a third country after Brexit.
- The definition of "competent authority" will be amended to mean only U.K. regulators.
- Functions specified in FICOR as required to be carried out by the European Supervisory Authorities will be transferred to the relevant U.K. regulators.
- Provisions requiring information sharing with EU authorities will be amended so that information sharing and other coordination is at the discretion of U.K. authorities but no longer mandatory.
- All Binding Technical Standards under FICOD will be carried through into U.K. law, with responsibility given to the FCA and PRA for their onshoring and subsequent maintenance. The FCA and PRA will consult on proposals for onshoring the relevant BTS.
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