The Bank of England’s amendments under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period

Published on 18 December 2020

The Bank of England’s amendments under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period – PS27/20

Overview

This Bank of England (Bank) and Prudential Regulation Authority (PRA) Policy Statement (PS) provides feedback to responses to Consultation Paper (CP) 13/20 ‘UK withdrawal from the EU: Changes before the end of the transition period’ (page 2 of 2) and CP18/19 ‘UK withdrawal from the EU: Changes following extension of Article 50’.  It also contains the Bank’s and PRA’s final and near-final policies. For ease of cross-reference, this PS broadly follows the same structure as PS5/19 ‘The Bank of England’s amendments to financial services legislation under the European Union (Withdrawal) Act 2018’.

The appendices to the PS (see below) provide links to the final, and near-final, policy material.

The Bank and PRA Technical Standards (EU Exit) Instruments, NtA non-binding materials, and the Bank transitional direction and related guidance documents are published as final as part of this PS.

The PRA transitional direction, PRA Rulebook (EU Exit) Instrument, and related guidance documents are published as ‘near-final’. This means that the direction and Instrument have been approved by the PRA’s governance committees, but they have not been formally made. The PRA cannot make its final transitional direction and PRA Rulebook (EU Exit) Instrument until after the PRA’s rules implementing CRD V have been made.

This PS is relevant to all firms authorised and regulated by the PRA, including those that expect to have a deemed permission under the ‘temporary permissions regime’ (TPR) or Financial Services Contracts Regime (FSCR), or that seek to apply for PRA authorisation in the future. It is also relevant to FMIs recognised and supervised by the Bank, including those central counterparties (CCPs) that expect to have a deemed recognition under the ‘temporary recognition regime’ (TRR).

Summary of responses

The PRA received five responses to CP13/20. Responses were received in relation to the PRA’s changes to the equity index in BTS 2015/2016 on the symmetric adjustment of the standard equity capital charge, bilateral margining, and the new BTS on liquidity horizons, which was expected to come into force before the end of the transition period as part of the implementation of the Internal Model Approach under the Fundamental Review of the Trading Book (FRTB) in the Capital Requirements Regulation (EU) (575/2013) (CRR) by Regulation (EU) (2019/876) (CRR 2).

The PRA additionally received two responses in relation to its changes to the Depositor Protection Part of the PRA Rulebook. These responses related to areas that were not covered in CP13/20, to which the PRA had previously consulted on in CP26/18.  One respondent highlighted two minor typographical errors in the draft PRA Rulebook (EU Exit) Instrument, which the PRA has now corrected in the near-final PRA Rulebook (EU Exit) Instrument appended to this PS.

The PRA received three responses to CP18/19. One respondent welcomed the PRA’s intention to extend the end date of transitional relief. This end date has been extended again to account for the transition period. Respondents also made a number of observations and requests for clarification relating to the Temporary Permission Regime (TPR) and Stay in Resolution rules which were not related to the issues covered in CP18/19. The PRA notified these respondents of previously communicated PRA policy as necessary.

Implementation

The PRA transitional direction, PRA Rulebook (EU Exit) Instrument, and related guidance documents are published as ‘near-final’. The PRA will make its final transitional direction and PRA Rulebook (EU Exit) Instrument before the end of the transition period, once the PRA’s rules implementing CRD V have been made.

The remainder of the materials published as part of this PS are final. This includes Bank and PRA Technical Standards (EU Exit) Instruments, NtA non-binding materials, and the Bank transitional direction and related guidance documents.

The transitional directions and Technical Standards (EU Exit) Instruments will all commence on IP completion day (11pm on Thursday 31 December 2020). Most provisions of the updated PRA Rulebook (EU Exit) Instrument will also commence on IP completion day, although a small number of provisions will take effect at different times as explained in the commencement provision. All NtA non-binding materials will become applicable on IP completion day.

These final instruments will sit alongside the other final EU Exit Instruments published in Section B of the April 2019 version of PS5/19. These instruments will also commence on IP completion day.

All EU Exit Instruments and related policy documents, transitional directions, and transitional guidance documents can be found on the ‘Transitioning to post-exit rules and standards’ webpage.

The Bank and/or PRA may issue further statements in relation to this topic, including in relation to any EU materials issued after the publication of this PS.

Policy Statement 27/20 Opens in a new window

Appendices

Section A: Transitional directions and guidance

Please note that some of these appendices are near-final.

• Appendix 1: PRA transitional direction instrument (pdf) Opens in a new window
• Appendix 2: PRA general guidance (pdf) Opens in a new window
• Appendix 3: CRR guidance note on transitional powers (pdf) Opens in a new window
• Appendix 4: Solvency II guidance note on transitional powers (pdf) Opens in a new window
• Appendix 5: Securitisation Regulation guidance note on transitional powers (pdf) Opens in a new window
• Appendix 6: PRA Rulebook guidance note on transitional powers (pdf) Opens in a new window
• Appendix 7: Bank transitional direction instrument (pdf) Opens in a new window
• Appendix 8: Bank general guidance (pdf) Opens in a new window
• Appendix 9: Resolution guidance note on transitional powers (pdf) Opens in a new window
• Appendix 10: FMI guidance note on transitional powers (pdf) Opens in a new window

Section B: Nationalising the Acquis

Please note that some of these appendices are near-final. 

• Appendix 1: Bank and PRA SoP ‘Interpretation of EU Guidelines and Recommendations: Bank of England and PRA approach after the UK’s withdrawal from the EU’
• Appendix 2: SS1/19 ‘Non-binding PRA materials: The PRA’s approach after the UK’s withdrawal from the EU’
• Appendix 3: SS2/19 ‘PRA approach to interpreting reporting and disclosure requirements and regulatory transactions forms after the UK’s withdrawal from the EU’
• Appendix 4: SS18/15 ‘Depositor and dormant account protection’
• Appendix 5: Near-final PRA Rulebook (EU Exit) Instrument 2020  (pdf) Opens in a new window
• Appendix 6: Final The PRA Technical Standards (Consequential Amendment) Instrument 2020 (pdf) Opens in a new window
• Appendix 7: Final The Technical Standards (Capital Requirements) (EU Exit) (No. 4) Instrument 2020 (pdf) Opens in a new window
• Appendix 8: Final The Technical Standards (Solvency II Directive) (EU Exit) (No. 2) Instrument 2020 (pdf) Opens in a new window
• Appendix 9: Final The Technical Standards (European Market Infrastructure) (EU Exit) (No. 5) Instrument 2020 (pdf) Opens in a new window
• Appendix 10: Final The Bank Technical Standards (Consequential Amendments) (EU Exit) Instrument 2020 (pdf) Opens in a new window
• Appendix 11: Final The Technical Standards (Bank Recovery and Resolution) (Amendment etc.) (EU Exit) (No. 3) Instrument 2020 (pdf) Opens in a new window
• Appendix 12: Bank SS ‘Non-binding Bank materials relating to Financial Market Infrastructure Supervision: The Bank’s approach after the UK’s withdrawal from the EU’
• Appendix 13: Final The Technical Standards (Central Securities Depositories) (Amendment etc.) (EU Exit) (No. 2) Instrument 2020 (pdf) Opens in a new window
• Appendix 14: Final The Technical Standards (European Market Infrastructure) (EU Exit) (No. 4) Instrument 2020 (pdf) Opens in a new window 

Published on 22 September 2020

The Bank of England’s amendments under the European Union (Withdrawal) Act 2018: Changes before the end of the transition period – CP13/20 

Overview

The UK’s membership of the European Union (EU) came to an end on Friday 31 January 2020 following the ratification by the UK and the EU of the Withdrawal Agreement. Under the terms of the Withdrawal Agreement, the UK entered into a transition period during which EU law continues to apply to the UK. The transition period is due to last until 11pm on Thursday 31 December 2020, which is defined in UK law as ‘IP completion day’. 

The UK’s withdrawal from the EU requires changes to be made to UK legislation to ensure that it remains functional. The European Union (Withdrawal) Act 2018 (the Act) converts directly applicable EU law into UK law and preserves domestic law that relates to EU membership, including domestic law and regulators’ rules that were introduced to implement EU directives. This body of law is referred to as ‘retained EU law’. The Act provides UK government ministers with powers to make changes to retained EU law so that it continues to operate effectively after the UK’s withdrawal from the EU – these processes are referred to as ‘onshoring’ or ‘nationalising the acquis’ (NtA). 

The government has delegated these powers to the Bank of England (Bank), as resolution authority and financial market infrastructure (FMI) competent authority, and the Prudential Regulation Authority (PRA), to fix deficiencies in rules and Binding Technical Standards (BTS) in their remits.

On Thursday 18 April 2019, the Bank and PRA published their amendments to financial services legislation under the Act. This included final EU Exit Instruments covering NtA changes to PRA and FMI rules, and BTS in the Bank’s and PRA’s remits. 

Subsequently, in light of the further extension to the Article 50 period until Thursday 31 October 2019, on Thursday 25 July 2019 the Bank and PRA published some further draft amendments to financial services legislation that came into effect during this period. These amendments were subsequently not made final following the further extension to the Article 50 period until Friday 31 January 2020. 

The Bank’s and PRA’s made EU Exit Instruments were due to come into effect on ‘exit day’ (11pm on Friday 31 January 2020). However, the EU (Withdrawal Agreement) Act 2020 defers the coming into force of these EU Exit Instruments until IP completion day. 

Before the end of the transition period, some further updates and amendments are needed to the Bank’s and PRA’s made EU Exit Instruments as a consequence of the transition period and the delay in the coming into force of these instruments from exit day to IP completion day. There is also additional EU legislation that applies before IP completion day and requires some further EU Exit Instruments to be made. 

This Consultation Paper (CP) contains: 

• Section A: an update on the Bank’s and PRA’s intended use of the temporary transitional power provided for in the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019.
• Section B: Bank and PRA consultation with proposals to fix deficiencies arising from the UK’s withdrawal from the EU and make consequential changes before the end of the transition period. Section B is split into three parts:

• Part 1 sets out Bank and PRA proposals in relation to consequential changes required to existing Bank and PRA EU Exit Instruments to update references to exit day and a small number of changes in light of adaptations to relevant EU legislation made by the European Economic Area (EEA) Agreement. 
• Part 2 sets out the PRA’s proposals in relation to the PRA Rulebook and BTS that will, or are expected to, be retained in UK law. 
• Part 3 sets out the Bank’s (as FMI competent authority) proposals in relation to BTS that will be retained in UK law.

This CP is relevant to all firms authorised and regulated by the PRA, including those that expect to have a deemed permission under the ‘temporary permissions regime’ (TPR) or Financial Services Contracts Regime (FSCR), or that seek to apply for PRA authorisation in the future. It is also relevant to FMIs recognised and supervised by the Bank, including those central counterparties (CCPs) that expect to have a deemed recognition under the ‘temporary recognition regime’ (TRR). 

Implementation

The Bank and PRA intend that the changes proposed in this CP would take effect on IP completion day. 

Responses and next steps

This consultation closes on Tuesday 17 November 2020.

The PRA and Bank invite feedback on the proposals set out in this CP. Please address any comments or enquiries to CP13_20@bankofengland.co.uk. 

Responses to this CP will be shared with the FCA.

Consultation Paper 13/20 Opens in a new window

Appendices

• Appendix 1: Draft PRA transitional direction (PDF 1.3MB) Opens in a new window
• Appendix 2: Draft Bank transitional direction (PDF 1.2MB) Opens in a new window
• Appendix 3: Draft amendments to SS2/19 ‘Approach to interpreting reporting and disclosure requirements and regulatory transactions forms after the UK’s withdrawal from the EU’ (PDF 1.7MB) Opens in a new window
• Appendix 4: PRA Rulebook: (EU Exit) Instrument 2020 (PDF 3.6MB) Opens in a new window
• Appendix 5: The PRA Technical Standards (Consequential Amendments) (EU Exit) Instrument 2020 (PDF 0.9MB) Opens in a new window
• Appendix 6: The Technical Standards (Capital Requirements) (EU Exit) (No. 4) Instrument 2020 (PDF 1.8MB) Opens in a new window
• Appendix 7: The Technical Standards (Solvency II Directive) (EU Exit) (No. 2) Instrument 2020 (PDF 1MB) Opens in a new window
• Appendix 8: The Technical Standards (European Market Infrastructure) (EU Exit) (No. 5) Instrument 2020 (PDF 1.2MB) Opens in a new window
• Appendix 9: The Technical Standards (Securitisation) (EU Exit) (No. 1) Instrument 2020 (PDF 1.2MB) Opens in a new window
• Appendix 10: The Bank Technical Standards (Consequential Amendments) (EU Exit) Instrument 2020 (PDF 0.9MB) Opens in a new window
• Appendix 11: The Technical Standards (Bank Recovery and Resolution) (Amendment etc.) (EU Exit) (No. 3) Instrument 2020 (PDF 1.2MB) Opens in a new window
• Appendix 12: The Technical Standards (Central Securities Depositories) (Amendment etc.) (EU Exit) (No. 2) Instrument 2020 (PDF 1.2MB) Opens in a new window
• Appendix 13: The Technical Standards (European Market Infrastructure) (EU Exit) (No. 4) Instrument 2020 (PDF 1.2MB) Opens in a new window