HM Treasury has published a policy update to confirm its legislative approach for applying the "FSMA model" to the assimilated EU capital requirements regime under the U.K. Capital Requirements Regulation and Capital Buffers Regulations. The application of the Financial Services and Markets Act model, which transfers firm-facing rulemaking powers to the regulators, will take place in three stages. HM Treasury will: (i) revoke articles of the U.K. CRR which the U.K. Prudential Regulation Authority will replace with rules in order to implement the Basel 3.1 package; (ii) revoke any U.K. CRR provisions left on the statute book following Basel 3.1 implementation and revoke and restate (with modifications) the CBR; and (iii) publish new legislation to: (a) restate the U.K. CRR equivalence regimes in legislation (with the exception of the Article 142 regime); (b) restate (with certain modifications) key U.K. CRR definitions which are needed to ensure that the overall framework continues to operate as intended; and (c) make any consequential amendments to other parts of the statute book which will be needed once the U.K. CRR has been completely revoked.
HM Treasury sets out its proposed approach for the first two stages and intends to consult on the final legislative stage in due course. HM Treasury has also published three pieces of draft legislation in connection with the first two stages: (1) draft commencement regulations that will give effect to the Basel 3.1 revocations; (2) draft regulations that will restate some of the CBR requirements in legislation, as well as transferring certain responsibilities to the PRA; and (3) draft commencement regulations that will bring into force the revocation of parts of the U.K. CRR related to the definition of capital and contain savings provisions relating to certain permissions granted under the U.K. CRR. HM Treasury welcomes technical comments on the proposed legislative approach within the next 6 weeks.
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