On 16 July 2020, HM Treasury (HMT) issued a consultation document on updating the UK’s prudential regime before the end of the transition period.

Key points in the consultation document include:

• The Government will transpose EU legislation which applies before 23:00 GMT on 31 December 2020 and this includes the CRD V which must be transposed by 28 December 2020.
• Much of the CRD V builds on the CRD IV. HMT’s implementation of the CRD IV delegated significant responsibility to the PRA. In light of this, HMT is only intending to legislate via secondary legislation to update the UK’s implementation of CRD IV (to reflect the amendments to the CRD IV that are made by the CRD V). This includes providing the PRA with new or updated powers, to implement the CRD V and to ensure that the PRA can update its rulebook as needed. The current consultation therefore only seeks comments in those areas requiring legislation, which include:
  • the intention to exempt investment institutions prudentially regulated by the FCA from the scope of CRD V, given the planned introduction of the Investment Firm Prudential Regime by summer 2021;
  • various updates to the capital buffers that the PRA can require of institutions, to allow the Financial Policy Committee and the PRA to maintain their current level of macro-prudential flexibility;
  • extending the PRA’s powers for consolidated supervision to holding companies and creating a new approved regime for Financial Holding Companies and Mixed Financial Holding Companies. In addition, granting the PRA an express power to remove members of the management body of institutions and holding companies; and
  • amendments to the list of entities exempted from CRD V.

The Government does not intend to legislate to prescribe changes to the framework for gender neutral remuneration policies. Further detail on the Government’s approach is provided in chapter 5 of the consultation document.

The deadline for comments on the consultation document is 19 August 2020.