Application Provision
1
Introduction
1.1
This supervisory statement (SS) sets out the approach the Prudential Regulation Authority (PRA) expects firms to take when interpreting EU-based references found in reporting and disclosure requirements and regulatory transactions forms after the end of the transition period.
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1.2
The UK’s membership of the EU came to an end on Friday 31 January 2020. The UK entered into a transition period lasting until 11pm on Thursday 31 December 2020, which is defined in UK law as ‘IP completion day’, during which EU law continued to apply to the UK.
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1.3
The PRA has not made line-by-line changes to reporting or disclosure requirements, or regulatory transactions forms, as a result of the UK’s withdrawal from the EU and the end of the transition period, as it would not have been proportionate to do so. Instead, the PRA expects firms to interpret EU references in those templates and instructions in accordance with this SS after the end of the transition period. In certain cases, the PRA has updated references to Technical Standards that are being revoked by HM Treasury, and were contained in the CRR reporting and disclosure requirements. The PRA has replaced these references with references to the relevant PRA CRR Rules.
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1.4
Chapter 2 outlines a general approach on this issue, which is in line with the approach taken more widely when onshoring European requirements. Chapter 3, 4 and 5 detail an expected approach on certain more specific issues. In any instance where the approach set out in these Chapters conflicts with the approach set out in Chapter 2, the approach set out in Chapters 3, 4 and 5 should take priority.
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1.5
Chapter 6 sets out how the guidance included in this SS interacts with the general transitional relief.
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1.6
Appendix 1 outlines which European Binding Technical Standards (BTS) and which parts of the PRA Rulebook are in scope of this guidance.
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2
General approach
2.1
Table A sets out the various different types of EU-based references, and a default approach to how these should be interpreted.
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Table A: General approach to interpretation of EU-based references
| Type of reference | Default interpretation |
|---|---|
| Reference to EU regulation | This should be read as a reference to the onshored version of the regulation. References to CRR refer to onshored CRR or PRA rules. |
| Reference to EU directive | This should be read as a reference to the UK legislation; PRA or Financial Conduct Authority (FCA) rules; or the UK, PRA or FCA processes that give effect to the directive, as amended on IP completion day. In some cases firms may also find it helpful to refer to the text of the EU directive as it stands on IP completion day, to provide additional context. |
| Reference to EU technical standard | This should be read as a reference to the onshored version of the technical standard. |
| Stand-alone reference to the European Union or EU (ie not in relation to legislation); or the European Economic Area or EEA | This should be read as a reference to the UK, except where otherwise noted below. |
| Reference to Member State, Member States or home Member State | This should be read as a reference to the UK, except where otherwise noted below. |
| Reference to third country | This should be read as a reference to a non-UK country. |
| Reference to Euros |
Where Euro is given as an example of a currency, and the same treatment is applied to other currencies (eg US dollars), no change in interpretation is required. Any reference to a threshold set in Euros will continue to apply. In any other case, further details can be found in Chapters 3, 4 and 5 of this SS of how this should be interpreted. |
| Reference to definition based on CRR or Solvency II requirements | In some cases, reporting definitions are written to mirror text in level one legislation (either in addition to, or instead of, including a direct reference to the legislation). Where this happens, institutions should also refer to the relevant onshored legislation or PRA rules to ensure they are interpreting the reporting requirements properly. Where this differs to the text in the technical standard, the definition in the relevant nationalised legislation or PRA rules should take priority. |
| Reference to accounting standards or to a specific accounting standard as endorsed by the EU (eg International Financial Reporting Standards (IFRS) 9) | This should be read as a reference to the implementation of the corresponding accounting standard(s) that is in place in the UK after IP completion day. |
| Reference to statistical definitions set out by European bodies outside of legislation (eg by the European Central Bank (ECB), Eurostat or European Commission), or to nonbinding materials such as guidelines or Q&As produced by the European Banking Authority (EBA) or the European Insurance and Occupational Pensions Authority (EIOPA). |
These should be read as a reference to the definitions or materials as they stand on IP completion day. Example occurrences: |
| References to lists or information produced by European bodies |
This should be read as a reference to the equivalent list or information produced by a UK body after the end of the transition period. Example occurrences: |
| Reference to ‘freedom to provide services’ |
On the basis that UK firms will no longer write business under the Freedom to Provide Services in the EU after IP completion day:
|
Footnotes
- 1. https://www.ecb.europa.eu/ecb/legal/pdf/02013r1071-20131127-en.pdf
- 2. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0361
- 3. https://ec.europa.eu/eurostat/web/balance-of-payments/publications
- 4. This can be found on the Regulatory reporting – banking sector page in the prudential regulation section of the Bank of England website: http://www.bankofengland.co.uk/prudential-regulation/regulatory-reporting/regulatory-reporting-banking-sector.
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3
Approach to specific cases: Reporting and disclosure requirements based on the CRR
3.1
Table B considers specific cases where CRR reporting and disclosure requirements include EU-based references, and sets out an expected approach in each instance.
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Table B: Approach to interpretation of specific EU-based references in reporting and disclosure requirements based on CRR
| Reference | Template title |
Legislative reference |
Interpretation |
|---|---|---|---|
| Row and column labels referring to EU |
Leverage ratio disclosures |
ITS 2016/200, Annex I |
Firms have an option to either retain the reference to the EU or remove this from the row labels. |
| Conservation buffer due to macro- prudential or systemic risk identified at the level of a Member State |
COREP C04.00, row 760, C06.02, column 440 |
PRA Rulebook, Reporting (CRR) Part, Reporting Requirements, Annexes I and II |
The reference to ‘…conservation buffer due to macro-prudential or systemic risk identified at the level of a Member State…’ should be read as ‘…conservation buffer due to enhanced prudential measures…’ |
|
References to |
CCyB disclosures |
PRA Rulebook, Disclosure (CRR) Part, Templates and Instructions, Annexes IX and X |
References in Part II of Annex II to exposures ‘defined in accordance with Article 140(4)(a) of Directive 2013/36/EU’ shall be read as references to ‘all exposure classes (other than those referred to in points (a) to (f) of CRR Article 112 ) that are subject to the own funds requirements for credit risk under Part Three, Title II of that Regulation’. References in Part II of Annex II to exposures ‘defined in accordance with Article 140(4)(b) of Directive 2013/36/EU’ shall be read, where the exposure is held in the trading book, as references to ‘all exposure classes (other than those referred to in points (a) to (f) of CRR Article 112) that are subject to the own funds requirements for specific risk under Part Three, Title IV, Chapter 2 of that Regulation or incremental default and migration risk under Part Three, Title IV, Chapter 5 of that Regulation’. References in Part II of Annex II to exposures ‘defined in accordance with Article 140(4)(c) of Directive 2013/36/EU’ shall be read, where the exposure is a securitisation as references to ‘all exposure classes (other than those referred to in points (a) to (f) of CRR Article 112) that are subject to the own funds requirements under Part Three, Title II, Chapter 5 of that Regulation’. References to relevant credit exposures defined in accordance to Article 140(4) of Directive 2013/36/EU are to be read in line with the instructions above. |
| EU references contained within the definitions of benchmarking portfolios and corresponding reporting instructions |
Benchmarking templates |
2016/2070, all annexes | The definitions of the benchmarking portfolios should remain unchanged. For the avoidance of doubt, this means that any references to codes assigned by the EBA; to Euros; to Central European Time (CET); and to European OTC options should remain as they are. |
| Reference to joint decisions |
Benchmarking template C105.01 |
2016/2070, Annexes III and IV |
Firms should report whether a joint decision, made prior to the date of EU withdrawal, continues to apply in relation to the use of the IRB approach for exposures included in the benchmarking portfolios. |
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4
Approach to specific cases: Reporting and disclosure requirements based on Solvency II
4.1
Table C considers specific cases where Solvency II reporting and disclosure requirements include EU-based references, and sets out an expected approach in each instance.
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Table C: Approach to interpretation of specific EU-based references in reporting and disclosure requirements based on Solvency II
| Reference | Template title |
Legislative reference |
Interpretation |
|---|---|---|---|
| Geographical splits with different treatment of EU/EEA countries |
S04.01, S04.02, S12.02, S17.02 |
ITS 2015/2450, Annexes I and II |
The current reporting requirements relating to geographical split continue to apply. References to the EEA should be read as a reference to the EEA plus the UK, and references to non-EEA should be read as a reference to all non-EEA countries excluding the UK. |
| References to repealed legislation |
S22.04, S22.05 |
ITS 2015/2450, Annexes I and II | Some Solvency II reporting and disclosure templates contain references to repealed legislation (Directive 2002/83/EC and Directive 2005/68/EC). Firms should continue to refer to this repealed legislation as at the date of last application. |
| References to repealed CRD legislation | S23.01 |
ITS 2015/2450, Annexes I, II and III ITS 2015/2452, Annexes I, II and III |
References to ‘credit institutions authorised in accordance with Directive 2006/48/EC’ should be read as a reference to PRA-regulated credit institutions. |
| Method for allocating identifying code | Multiple templates |
ITS 2015/2450, Annexes I, II and III | The instructions for assigning identifying codes distinguish between entities in the EEA and those outside the EEA. Firms should continue to use the same identifying codes as they have used previously. |
| Method for allocating code to be used for Issuer Country | S06.02, S06.03, S11.01 |
ITS 2015/2450, Annexes I, II and III |
Firms should continue to use the code ‘EU’ for European Union Institutions. |
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5
Approach to specific cases: Reporting and disclosure requirements set out in PRA Rulebook requirements
5.1
Table D considers specific cases where templates within the PRA Rulebook reporting and disclosure requirements include EU-based references, and sets out an expected approach in each instance.
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5.2
The Appendix lists the PRA parts and subsections in scope of this guidance.
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Table D: Approach to interpretation of specific EU-based references in reporting and disclosure requirements set out in PRA rules
| Reference | Template title |
Rulebook reference |
Interpretation |
|---|---|---|---|
| Geographical splits with different treatment of EU/EEA countries |
FSA016 |
CRR Firms; Regulatory Reporting Part |
The reporting requirements for this template remain unchanged. Row 2 should report investments relating to UK and EEA countries, and row 3 should report investments related to all countries except the UK and EEA countries. |
| Row and column labels referring to EU |
FSA083 |
CRR Firms; Reporting Leverage Ratio Part |
No changes required to the current template; the references to ‘EU’ in the row and column labels should remain unchanged. |
| Reference to EEA branches | Branch Return |
Non-CRR Firms; Incoming and Third Country Firms Part; Branch Return |
The reporting requirement in row 9 of the Lending section remains unchanged. |
| Conservation buffer due to macro-prudential or systemic risk identified at the level of a Member State | PRA101, PRA102, PRA103 | CRR Firms; Regulatory Reporting Part; Capital + |
The reference to ‘…conservation buffer due to macro-prudential or systemic risk identified at the level of a Member State…’ in the templates should be read as ‘…conservation buffer due to enhanced prudential measures…’ |
| Reference to the exchange rate used by the European Commission for financial programming and the budget for December of the reported year |
Remuneration Benchmarking Information Report | CRR Firms; Remuneration Part | The reference to ‘…the exchange rate used by the European Commission for financial programming and the budget…’ should be read as ‘…the exchange rate used on the Bank of England database’ |
| Conservation buffer due to macro-prudential or systemic risk identified at the level of a Member State (%) |
Pillar 3 UK M1, row UK 8a |
CRR Firms; Disclosure (CRR) Part; Annexes 1 and 2 |
The reference to ‘…conservation buffer due to macro-prudential or systemic risk identified at the level of a Member State…’ should be read as ‘…conservation buffer due to enhanced prudential measures…’ |
| Reference to the exchange rate used by the Commission for financial programming and the budget within remuneration disclosure requirements | Pillar 3 EU REM4 | CRR Firms; Disclosure (CRR) Part; Annexes 33 and 34 |
The reference to ‘…the exchange rate used by the Commission for financial programming and the budget…’ should be read as ‘…the exchange rate used on the Bank of England database’ |
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6
Interaction with wider transitional relief
6.1
The PRA has set out in a direction and accompanying guidance5 the approach it is taking to transitional relief. The reporting and disclosure expectations in scope of this supervisory statement should be interpreted in light of the direction and guidance.
Footnotes
- 5. The directions and accompanying guidance are available at: https://www.bankofengland.co.uk/eu-withdrawal/transitioning-to-post-exit-rules-and-standards.
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Appendix: Scope
The PRA expects firms to apply the approach set out in this SS to the Annexes of the following European Binding Technical Standards (as amended up until IP completion day):
| Firms | Title | Reference |
|---|---|---|
| CRR Firms | Disclosure of the leverage ratio for institutions, according to Regulation (EU) No 575/2013 of the European Parliament and of the Council |
ITS 2016/200 |
| CRR Firms | Templates, definitions and IT-solutions to be used by institutions when reporting to the European Banking Authority and to competent authorities in accordance with Article 78(2) of Directive 2013/36/EU of the European Parliament and of the Council | ITS 2016/2070 |
| SII Firms | Templates for the submission of information to the supervisory authorities according to Directive 2009/138/EC of the European Parliament and of the Council |
ITS 2015/2450 |
| SII Firms | Procedures, formats and templates of the solvency and financial condition report in accordance with Directive 2009/138/EC of the European Parliament and of the Council | ITS 2015/2452 |
| SII SPVs | Procedures for supervisory approval to establish special purpose vehicles, for the cooperation and exchange of information between supervisory authorities regarding special purpose vehicles as well as to set out formats and templates for information to be reported by special purpose vehicles in accordance with Directive 2009/138/EC of the European Parliament and of the Council |
ITS 2015/462 |
The PRA expects firms to apply the approach set out in this SS to templates contained within the following parts, and sub-sections, of the PRA Rulebook:
| Firms | Rulebook part | Sections |
|---|---|---|
| CRR Firms | Regulatory Reporting | All |
| CRR Firms |
Reporting Leverage Ratio | All |
| CRR Firms | Reporting Pillar 2 | All |
| Non-CRR Firms |
Credit Unions | 19 Regulatory Reporting for Credit Unions |
| Non-CRR Firms |
Incoming Firms and Third Country Firms | 3 Branch Return 4 Form |
| Non-SII Firms |
Friendly Society – Reporting |
All |
| Non-SII Firms |
Insurance Company – Reporting |
All |
| SII Firms |
Reporting | All |
| SII Firms |
Third Country Branches | 9 Reporting |
| Controllers | Change in Control | 6 Forms |
| All firms | Senior Managers Regime – Applications and Notifications |
8 Forms |
| ISPVs | Insurance Special Purpose Vehicles |
6 Forms |
| All firms | Notifications | 10 Forms |
| CRR Firms |
CRR Firms; Remuneration Part |
All |
| CRR Firms | Disclosure (CRR) Part |
All |
| CRR Firms | Reporting (CRR) Part |
All |
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