On 19 March 2025, the Prudential Regulation Authority (PRA) published a consultation paper, CP3/25 – Recognised exchanges policy and transfer of main indices.

Background

HM Treasury made amendments in November 2024 to the definition of ‘recognised exchange’ (RE) in Article 4(1)(72)(c) of the assimilated Capital Requirements Regulation (UK CRR). Under that article, an investment exchange will be an RE if it satisfies any conditions specified in the PRA Rulebook for the purpose of identifying REs or assets traded on such exchanges. Those assets receive preferential treatment within the prudential framework – the capital treatment is more risk sensitive as it recognises the risk reducing measures in place due to the exchange being an RE.

Proposals

The PRA’s proposals in CP3/25 mainly address the conditions under which an overseas exchange can become an RE. Once these conditions are finalised, it will be the firm’s responsibility to make an assessment in line with the conditions.

The proposals include:

  • Conditions for the purposes of identifying recognised exchanges or assets traded on such exchanges under Article 4(1)(72)(c) UK CRR.
  • Implementation and evaluation proposals of the REs policy.
  • The revocation of supervisory statement SS20/13.
  • An amendment to the definition of ‘higher risk equity exposures’ that was included in the PRA’s near-final rules implementing the Basel 3.1 standards, to make related changes to the near-final treatment of listed equities under the standardised approach for credit risk.
  • Restating in the PRA Glossary of the list of ‘main indices’ that is currently set out in a technical standard.

Next steps

The consultation closes on 18 June 2025.

In terms of timing for implementing these changes, the PRA proposes that:

  • The implementation date for the rules specifying conditions under CRR Article 4(1)(72)(c) and the revocation of SS20/13 would be Wednesday 1 July 2026.
  • The changes to the PRA’s near-final rules implementing the Basel 3.1 standards would be introduced alongside the broader implementation of these standards.