On 25 March 2021, there was published by the Government a draft of the Capital Requirements Regulation (Amendment) (EU Exit) Regulations 2021.
When finalised the draft Regulations extend the dates of the provision exempting UK commodities dealers from specific prudential requirements until the Investment Firm Prudential Regime (IFPR) applies to them on 1 January 2022.
The exemptions in Articles 493 and 498 of the Capital Requirements Regulation (CRR), to own funds requirements and large exposure limits, relieve commodities dealers of three obligations: first, to hold regulatory capital equal to at least 8% of total risk exposures; second, to calculate and report exposures to any individual counterparty equal to or greater than 10% of a firm’s eligible capital; and third, a prohibition from incurring exposures of more than 25% of eligible capital or EUR 150 million, whichever is higher, to a counterparty or group of counterparties.
These provisions in the CRR were amended by the EU by way of a corrigendum to the EU’s Investment Firm Regulation so that they are aligned with the planned introduction of the EU’s new regime for investment firms. Following the corrigendum, the CRR now makes provision for these exemptions to apply until 26 June 2021.
The UK’s equivalent regime for investment firms and commodities dealers – the IFPR – will not be introduced until 1 January 2022. Without amendment, Articles 493 and 498 of the onshored CRR will require UK commodities dealers to comply with the prudential requirements of the CRR between 26 June and 31 December 2021. The Regulations therefore extend the expiry date for CRR exemptions for UK commodities dealers to 1 January 2021 in line with the introduction of the UK’s IFPR regime.