The Capital Requirements (Amendment) (EU Exit) Regulations 2018

Interpretation: regulators' rules2A

1

In these Regulations—

a

a reference to the PRA rulebook is to the rulebook published by the PRA containing rules made by that Authority under FSMA as the rulebook has effect on F70IP completion day;

b

any reference to a sourcebook is to a sourcebook in the Handbook of Rules and Guidance published by the FCA containing rules made by that Authority under FSMA as the sourcebook has effect on F70IP completion day.

c

“Directive 2013/36/EU UK law” means the law of the United Kingdom which was relied on by the United Kingdom immediately before F70IP completion day to implement the capital requirements directive and its implementing measures—

i

as they have effect on F70IP completion day, in the case of rules made by the FCA or by the PRA under FSMA; and

ii

as amended from time to time, in all other cases.

2

By way of an exception to paragraph 1(c), for the purposes of regulations 21, 34, 34A, 35 and 35B, and the references to the capital requirements directive therein, “Directive 2013/36/EU UK law” shall mean the law of the United Kingdom or any part of it, which was relied on by the United Kingdom immediately before F70IP completion day to implement Directive 2013/36/EU and its implementing measures as amended from time to time.

Supervisory review and evaluation process34A

1

The competent authority must review the arrangements, strategies, processes and mechanisms implemented by an institution to comply with Directive 2013/36/EU UK law and the capital requirements regulation and evaluate—

F44a

in the case of the PRA—

i

risks to which that institution is or might be exposed, and

ii

risks revealed by stress testing, taking account of the nature, scale and complexity of that institution’s activities;

b

in the case of the FCA—

i

the risks referred to in paragraph (a), and

ii

the risks that institution poses to the UK financial system.

2

On the basis of the review and evaluation referred to in paragraph (1), the competent authority must determine whether the arrangements, strategies, processes and mechanisms implemented by an institution and the own funds and liquidity held by it ensures a sound management and coverage of its risks.

3

The competent authority must establish the frequency and intensity of the review and evaluation referred to in paragraph (1) having regard to the size, systemic importance, nature, scale and complexity of the activities of the institution concerned.

Ongoing review of the permission to use internal approaches34B

1

The competent authority must review on a regular basis, and at least every 3 years, an institution's compliance with the requirements regarding internal approaches that require permission by the competent authorities before using such internal approaches for the calculation of own funds requirements in accordance with Part 3 of the capital requirements regulation.

2

In its review the competent authority must have particular regard to changes in an institution's business and to the implementation of those approaches to new products.

3

Where material deficiencies are identified in risk capture by an institution's internal approaches, the competent authority must ensure these are rectified, or take appropriate steps to mitigate their consequences, including by imposing higher multiplication factors, or imposing capital add-ons, or taking other appropriate and effective measures.

4

The competent authority must in particular review and assess whether the institution uses well developed and up-to-date techniques and practices for its internal approaches.

5

If for an internal market risk model numerous overshootings referred to in Article 366 of the capital requirements regulation indicate that the model is not or is no longer sufficiently accurate, the competent authority must revoke the permission for using the internal model or impose appropriate measures to ensure that the model is improved promptly.

6

If an institution has received permission to apply an approach that requires permission by the competent authority before using such an approach for the calculation of own funds requirements in accordance with Part 3 of the capital requirements regulation but no longer meets the requirements imposed as part of the grant of permission for applying that internal approach, the competent authority must require the institution either to satisfy the competent authority that the effect of non-compliance is immaterial where applicable in accordance with the capital requirements regulation or to present a plan for the timely restoration of compliance with the requirements and set a deadline for its implementation.

7

The competent authority must require improvements to that plan if it is unlikely to result in full compliance or if the deadline is inappropriate.

8

If the institution is unlikely to be able to restore compliance within an appropriate deadline and, where applicable, has not satisfactorily demonstrated that the effect of non-compliance is immaterial, the permission to use the internal approach must be revoked or limited to compliant areas or those where compliance can be achieved within an appropriate deadline.

Application of supervisory measures to institutions with similar risk profiles35A

Where the F45FCA determines that institutions with similar risk profiles such as similar business models or geographical location of exposures, are or might be exposed to similar risks or pose similar risks to the UK financial system, it may apply a SREP to those institutions in a similar or identical manner.

Supervisory powers35B

For the purposes of a SREP, an internal model review, and in order to address a situation where an institution does not meet the requirements of the Capital Requirements Regulation or Directive 2013/36/EU UK law, or where the competent authority has evidence that an institution is likely to breach such requirements within the following twelve months, the competent authorities may at least—

a

require the reinforcement of the arrangements, processes, mechanisms and strategies implemented in accordance with Directive 2013/36/EU UK law which implemented Articles 73 and 74;

b

require institutions to present a plan to restore compliance with supervisory requirements and set a deadline for its implementation, including improvements to that plan regarding scope and deadline;

c

require institutions to apply a specific provisioning policy or treatment of assets in terms of own funds requirements;

d

to restrict or limit the business, operations or network of institutions or to request the divestment of activities that pose excessive risks to the soundness of an institution;

e

require the reduction of the risk inherent in the activities, products and systems of institutions;

f

require institutions to limit variable remuneration as a percentage of net revenues where it is inconsistent with the maintenance of a sound capital base;

g

require institutions to use net profits to strengthen own funds;

h

restrict or prohibit distributions or interest payments by an institution to shareholders, members or holders of Additional Tier 1 instruments (which meets the requirements of Article 52 of the capital requirements regulation) where the prohibition does not constitute an event of default of the institution;

i

impose additional or more frequent reporting requirements, including reporting on capital and liquidity positions;

j

impose specific liquidity requirements, including restrictions on maturity mismatches between assets and liabilities;

k

require additional disclosures.

Specific publication requirements35C

1

The competent authorities may require institutions to—

a

publish information referred to in Part 8 of the capital requirements regulation more than once per year, and to set deadlines for publication

b

use specific media and locations for publications other than the financial statements and

2

The competent authorities may require parent undertakings to publish annually, either in full or by way of references to equivalent information, a description of their legal structure and governance and organisational structure of the group of institutions.

Overview7

1

This Part makes provisionF54...—

F55a

for how the Bank—

F56i

must assess and set a countercyclical capital buffer rate for the United Kingdom (which relates to exposures located in the United Kingdom), and;

F56ii

may recognise or set buffer rates for exposures which are located in countries other than the United Kingdom and held by UK institutions.

F57b

for how the PRA is to apply institution-specific countercyclical capital buffers to parent financial holding companies and parent mixed financial holding companies.

2

The buffer rates mentioned in paragraph (1) must be used in the determination of institution-specific countercyclical capital buffers.

Buffer rate rules12A

1

Nothing in paragraph 17(9)(b) of Schedule 6A to the Bank of England Act 1998 or paragraph 8 of Part 1 of Schedule 1ZA to FSMA prohibits the making of a rule by the PRA or the FCA that references a countercyclical capital buffer rate set by the FPC under this Part.

Buffer rates for EEA exposures: savings provision14

1

Where, on or before F72IP completion day —

a

an EEA authority set a buffer rate (“the EEA buffer rate”) for that EEA state for the purpose of enabling institutions in that EEA State to calculate their institution-specific countercyclical capital buffer,

b

the EEA buffer rate exceeded 2.5%, and

c

the EEA buffer rate was recognised by the FPC, so that UK institutions with exposures located in that EEA State could be required by the PRA and FCA to apply it in their calculation of their institution-specific countercyclical capital buffers,

the FPC's decision to recognise the EEA buffer rate must be treated after F72IP completion day as though it were a decision made under regulation 15 of these Regulations.

Duty of PRA to identify G-SIIs21

The PRA must identify G-SIIs in accordance with the provisions of this Part.

2

A G-SII must also be—

F58a

a group, the parent undertaking of which is—

i

a UK parent institution,

ii

a UK parent financial holding company, or

iii

a UK parent mixed financial holding company, or

b

an institution authorised in the United Kingdom which is not a subsidiary of a body mentioned in sub-paragraph (a)(i) to (iii).

Duty of PRA to identify O-SIIs29

The PRA must identify O-SIIs in accordance with the provisions of this Part.

F68PART 5ZAO-SII Buffers

CHAPTER 1Interpretation and power to impose O-SII buffer

Interpretation34

1

For the purposes of this Part, a relevant O-SII is an O-SII, or part of an O-SII, which is—

a

a ring-fenced body within the meaning of section 142A of FSMA;

b

a large building society; or

c

a financial holding company or a mixed financial holding company which—

i

has a ring-fenced body or a large building society as a subsidiary; and

ii

is required, whether by the PRA by a direction under section 192C of FSMA or otherwise, to comply with the requirements of the capital requirements regulation and Directive 2013/36/EU UK law on a sub-consolidated basis.

2

In paragraph (1)(b) “large building society” means a building society where the sum total of the following two values exceeds £25 billion—

a

the value of shares issued by the building society that are not deferred shares; and

b

the value of deposits held in accounts with the building society where one or more of the account holders is a small business.

3

In paragraph (1)(c), “Directive 2013/36/EU UK law”, “financial holding company” and “mixed financial holding company” have the meanings given in section 192O of FSMA.

4

In paragraph (2)—

a

“building society”, “deferred shares”, “deposit” and “share” have the meaning given by section 119 (interpretation) of the Building Societies Act 1986;

b

a person is a small business only if the person is a small business for the purposes of section 7(10) (the funding limit) of the Building Societies Act 1986.

5

For the purposes of this Part—

• “buffer rate” has the meaning given in regulation 34ZA(2);

• “FPC framework” has the meaning given in regulation 34ZB(1);

• “O-SII buffer” has the meaning given in regulation 34ZA(1).

Power for the PRA to require an O-SII buffer to be maintained34ZA

1

The PRA may require a relevant O-SII to maintain Common Equity Tier 1 capital, to be known as an “O-SII buffer”.

2

The amount of capital which the PRA may require a relevant O-SII to hold (“the buffer rate”) must be expressed as a percentage of the relevant O-SII’s total risk exposure amount calculated in accordance with Article 92(3) of the capital requirements regulation.

CHAPTER 2United Kingdom buffer rates for O-SIIs

O-SII buffer rates: The FPC framework34ZB

1

The FPC must have a framework for O-SII buffer rates in the United Kingdom established in accordance with this regulation (“the FPC framework”).

2

The FPC framework must contain the following elements—

a

a set of criteria for assessing the extent to which the failure or distress of a relevant O-SII might pose a risk to the financial system;

b

a methodology for measuring the criteria and giving a relevant O-SII a single score in relation to the criteria; and

c

in relation to each score that an O-SII may receive, a buffer rate that corresponds to the score.

3

In paragraph (2)(a), a relevant O-SII is in distress only if it experiences a significant deterioration in its financial situation.

4

In paragraph (2)(a) the criteria to be specified must each be—

a

measurable; and

b

capable of being applied to a relevant O-SII on an individual basis, a sub-consolidated basis and a consolidated basis.

5

In paragraph (2)(c) the only buffer rates that the FPC may specify are 0%, 1%, 1.5%, 2%, 2.5% and 3%.

6

The way in which buffer rates correspond to scores in the FPC framework—

a

must be clear, precise and unambiguous;

b

must ensure that a score corresponds to one buffer rate only;

c

may not be expressed in terms of a discretion conferred on a person or body (including the FPC); and

may be expressed by way of a formula, an algorithm, a graph or a table.

7

The Bank must publish each element of the FPC framework, together with the FPC’s justification for each element.

Determination by PRA of buffer rates for individual relevant O-SIIs34ZC

1

The PRA may, in relation to each relevant O-SII, determine—

a

whether or not to set a buffer rate for the O-SII; and

b

where it does set a buffer rate, subject to paragraph (3), the level of the rate;

by applying the steps set out in paragraph (2).

2

The steps set out in this paragraph are—

Step 1—determining level of consolidation

The PRA must choose one of the following bases on which to apply the criteria specified in the FPC framework to the relevant O-SII—

a

an individual basis;

b

a sub-consolidated basis; or

c

a consolidated basis.

Step 2—deriving a framework buffer rate from the FPC framework

The PRA must derive a buffer rate from the FPC framework for the relevant O-SII (“a framework buffer rate”) by—

a

applying the methodology of the FPC framework to obtain a score for the relevant O-SII; and

b

ascertaining to what buffer rate the score corresponds under the FPC framework.

Step 3—setting a buffer rate for a relevant O-SII based on supervisory judgment

The PRA may, if it makes a sound supervisory judgment that it is appropriate to do so—

a

set a buffer rate for a relevant O-SII, even if it has derived a framework buffer rate for the institution of 0% under Step 2;

b

set a buffer rate for a relevant O-SII which is different to the framework buffer rate derived for the institution under Step 2; or

c

set no buffer rate for a relevant O-SII, even if it has derived a framework buffer rate for the institution of other than 0% under Step 2.

Where the PRA sets a buffer rate under sub-paragraph (a) or (b) of this Step the rate must be 1%, 1.5%, 2%, 2.5% or 3%.

Step 4—setting a buffer rate for relevant O-SIIs based on framework buffer rate

Unless the PRA exercises the discretion in Step 3—

a

where the PRA derives a framework buffer rate under Step 2 of 0% for the relevant O-SII, the PRA may not set a buffer rate for the institution; and

b

where the PRA derives a framework buffer rate under Step 2 other than 0% for the relevant O-SII, the PRA must set the rate so derived as the buffer rate for the institution.

3

Where paragraph (4) applies, the PRA may not apply an O-SII buffer rate to a relevant O-SII which exceeds the lower of—

a

the sum of—

i

the higher of the G-SII or the O-SII buffer rate applicable to the group at consolidated level, and

ii

1% of the total risk exposure amount calculated in accordance with Article 92(3) of the capital requirements regulation; and

b

3% of the total risk exposure amount calculated in accordance with Article 92(3) of the capital requirements regulation.

4

This paragraph applies where the relevant O-SII is a subsidiary of—

a

a G-SII; or

b

an O-SII, which is subject to an O-SII buffer on a consolidated basis.

5

Where a group is subject on a consolidated basis to both a G-SII buffer and an O-SII buffer, only the higher buffer is to apply.

CHAPTER 3Date of application and calculation of O-SII buffer

Date of application34ZD

1

Where the PRA sets a buffer rate for a relevant O-SII under regulation 34ZC, the PRA must decide the date from which the O-SII must apply that rate in the calculation of its O-SII buffer.

2

Where the PRA has set a buffer rate for a relevant O-SII under regulation 34ZC and determines that a buffer rate is no longer to be set for the O-SII under that regulation, the PRA must decide the date from which this takes effect.

Calculation of buffer34ZE

1

The PRA must require a relevant O-SII to calculate its O-SII buffer by applying the buffer rate set for it under regulation 34ZC to all its exposures.

2

The PRA must require the relevant O-SII, for the purposes of the calculation required under paragraph (1), to—

a

determine the value of its exposures by applying the level of consolidation selected by the PRA under Step 1 of regulation 34ZC(2); and

b

apply the buffer rate equally to all exposures, regardless of where they are located.

CHAPTER 4Publication, Review and Appeals

Publication: United Kingdom buffer rates34ZF

1

Where the PRA sets a buffer rate for a relevant O-SII under regulation 34ZC, the PRA must publish the following information—

a

the relevant O-SII to which the buffer rate applies;

b

the buffer rate;

c

the justification for setting the buffer rate;

d

the date from which the relevant O-SII must apply the buffer rate;

e

the level of consolidation to be used in the calculation of the O-SII buffer (as determined under Step 1 of regulation 34ZC(2)); and

f

the fact that the O-SII buffer applies to exposures located anywhere in the world.

2

Where the PRA determines that a buffer rate is no longer to be set for a relevant O-SII under regulation 34ZC, the PRA must publish the following information—

a

the fact that the buffer rate is no longer set;

b

the fact that the relevant O-SII is no longer required to maintain an O-SII buffer;

c

the justification for ceasing to set the buffer rate; and

d

the date from which the relevant O-SII may cease to apply the buffer rate.

3

A reference to the PRA’s justification in paragraphs (1)(c) and (2)(c) includes the PRA’s justification for doing anything under Step 3 of regulation 34ZC(2).

4

The PRA must not publish information under paragraph (1)(c) or (2)(c) if publication might jeopardise the stability of the financial system.

Review34ZG

1

The FPC must review the elements of the FPC framework at least every second year.

2

The PRA must review the following matters at least once every year—

a

a buffer rate set under regulation 34ZC;

b

a decision not to set a buffer rate under regulation 34ZC.

Appeals34ZH

1

A person who is aggrieved by a decision of the PRA under regulation 34ZC may refer the matter to the Tribunal.

2

The scope of such an appeal is limited to—

a

the application of Step 2 of regulation 34ZC(2); and

b

the exercise of the PRA’s discretion in Step 3 of regulation 34ZC(2).

F69PART 5ASystemic Risk Buffer

Interpretation34A

In this Part—

• “institution” means—

  1. a

     a credit institution, or

  2. b

     an investment firm which is for the time being designated by the PRA under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013;

• “recognition decision” means a decision by the PRA to recognise a third country buffer rate;

• “relevant entity” has the meaning given in regulation 34C(1);

• “systemic risk buffer” has the meaning given in regulation 34C(1);

• “third country buffer rate” has the meaning given in regulation 34B.

Third country buffer rates: recognition34B

1

In this Part, a “third country buffer rate” means—

a

in relation to an EEA state, a buffer rate set in accordance with Article 133 of the capital requirements directive as it has effect in EU law as amended from time to time, or if revoked, by its successor; or

b

in relation to a country other than the United Kingdom which is not an EEA state, a buffer rate set by the relevant authority of that country, that the PRA considers serves a similar purpose to the buffer rates that may be set in accordance with Article 133 of the capital requirements directive as it has effect in EU law as amended from time to time, or if revoked, by its successor.

2

The PRA may decide to recognise a third country buffer rate (“a recognition decision”).

3

A recognition decision may relate to all institutions or institutions of a specified description.

4

The PRA may revoke a recognition decision.

Requirement to maintain a systemic risk buffer34C

1

The PRA may require an institution, a UK parent financial holding company, or a UK parent mixed financial holding company (a “relevant entity”) to hold additional Common Equity Tier 1 capital (“a systemic risk buffer”) in relation to some or all of the exposures referred to in regulation 34G, in order to prevent or mitigate macro-prudential or systemic risks which are not covered—

a

under the capital requirements regulation; or

b

by the countercyclical capital buffer, the G-SII buffer or the O-SII buffer provided for in these Regulations.

2

If the PRA imposes a requirement on a relevant entity under paragraph (1), the PRA must specify—

a

the exposures or subset of exposures to which that requirement relates;

b

the buffer rate to be applied to those exposures.

3

The only buffer rates that the PRA may specify for the purposes of paragraph (2) are 0.5%, 1%, 1.5%, 2%, 2.5%, 3%, 3.5%, 4%, 4.5% and 5%.

4

For the purposes of this regulation, a risk is a “macro-prudential or systemic risk” if it is a risk of disruption in the financial system with the potential to have serious negative consequences to the financial system and the real economy in the United Kingdom.

5

The PRA may impose a requirement under paragraph (1) on all relevant entities, or on relevant entities of a specified description, and may impose different requirements in relation to different relevant entities or classes of exposures.

Third country rates: application to relevant entities34D

1

The PRA may require a relevant entity which has exposures located in a third country, in relation to which a recognition decision is in effect, to apply the third country buffer rate, in relation to its total exposures in that country.

2

The powers in paragraph (1), in relation to a recognition decision which is limited to relevant entities of a specified description (in accordance with regulation 34B(3)), apply only to relevant entities falling within the description.

3

Where a relevant entity is required to apply a third country buffer rate under paragraph (1), the PRA must specify, to the relevant entity concerned, the basis to be applied in valuing exposures from one of the following bases—

a

an individual basis;

b

a sub-consolidated basis; or

c

a consolidated basis.

4

Where the PRA require a relevant entity to apply a third country buffer rate under paragraph (1)—

a

if the third country buffer rate addresses different risks to the systemic risk buffer rate applied under regulation 34C (the “regulation 34C rate”), the third country buffer rate may be applied cumulatively with the systemic risk buffer rate;

b

if the third country buffer rate addresses the same risks as the regulation 34C rate, only the higher buffer rate is to be applied.

5

The PRA may revoke a requirement imposed under paragraph (1).

6

Where the PRA decides that a relevant entity must apply a third country buffer rate, the regulator must decide the date from which the relevant entity must apply the third country buffer rate.

7

Where the PRA revokes a requirement that a relevant entity maintain a third country buffer, the regulator must decide the date from which the relevant entity must cease to apply the third country buffer rate.

Calculation of the systemic risk buffer34E

1

Relevant entities must calculate the amount of the systemic risk buffer in accordance with the following formula—

where—

• “SRB” is the systemic risk buffer;

• “R_T”is the buffer rate applicable to the amount of the total risk exposure of a relevant entity;

• “E_T” is the amount of the total risk exposure of the relevant entity calculated in accordance with Article 92(3) of the capital requirements regulation;

• “I” is the index denoting the subset of exposures specified by the PRA under regulation 34C(2);

• “R_I” is the buffer rate applicable to the amount of the risk exposure of I;

• “E_I” is the risk exposure amount of a relevant entity for I calculated in accordance with Article 92(3) of the capital requirements regulation.

2

The PRA may require a relevant entity to maintain a systemic risk buffer on—

a

an individual basis;

b

a sub-consolidated basis; or

c

a consolidated basis.

Cumulative buffers34F

1

Where a relevant entity is subject to a systemic risk buffer, applied in accordance with this Part, subject to paragraph (2), that buffer is to be cumulative with the O-SII buffer applied under Part 5ZA or the G-SII buffer set under Part 4.

2

The sum of the systemic risk buffer rate and the O-SII buffer rate or G-SII buffer rate may not exceed 5%.

Systemic risk buffer exposures34G

A systemic risk buffer may apply to the following exposures—

a

all exposures located in the United Kingdom;

b

the following sectoral exposures located in the United Kingdom—

i

all retail exposures to natural persons which are secured by residential property,

ii

all exposures to legal persons which are secured by mortgages on commercial immoveable property,

iii

all exposures to natural persons other than those specified in sub-paragraph (i),

iv

all exposures to legal persons other than those specified in sub-paragraph (ii);

c

all exposures located in a third country;

d

sectoral exposures referred to in paragraph (b) which are located in a third country;

e

a specified subset of the exposures referred to in paragraphs (a) to (d).

Notifications34H

1

Where the PRA gives or revokes a recognition decision under regulation 34B, it must notify—

a

the FCA;

b

the authorities of the third country which are responsible for supervision of undertakings; and

c

if different, the authorities of the third country responsible for setting the buffer rate.

2

When the relevant entity to which one or more systemic risk buffers apply is a subsidiary undertaking of a parent undertaking which is incorporated under the law of a third country, the PRA must notify the competent authority of the third country concerned of any requirements imposed on the relevant entity under regulation 34C.

3

Where a systemic risk buffer is applied to exposures in a third country, the PRA must notify the competent authority of the third country concerned.

Publication: systemic risk buffer34I

1

Where the PRA requires a relevant entity to maintain a systemic risk buffer under regulation 34C, it must publish the following information on its website—

a

the systemic risk buffer rate;

b

the relevant entities to which the systemic risk buffer applies;

c

the exposures to which the systemic risk buffer rate applies;

d

the justification for setting or resetting the systemic risk buffer rate;

e

the date from which the relevant entities are to apply the setting or the resetting of the systemic risk buffer rate; and

f

the names of the countries where exposures located in those countries are recognised in the systemic risk buffer.

2

The PRA must not publish information under paragraph (1)(d) if publication might jeopardise the stability of the financial system.

3

Where the PRA revokes a requirement that a relevant entity maintain a systemic risk buffer rate under regulation 34C, it must publish—

a

the fact that the requirement has been revoked;

b

the justification for its decision to revoke the requirement; and

c

the date from which the relevant entity may cease to apply the systemic risk buffer rate.

Publication: third country buffer rates34J

1

Where the PRA recognises a third country buffer rate under regulation 34B, it must publish—

a

the buffer rate; and

b

the justification for recognising the buffer rate.

2

Where the PRA requires a relevant entity to apply a third country buffer rate under regulation 34D, it must publish—

a

the date from which the relevant entity must apply the third country buffer rate;

b

the location of the exposures to which the third country buffer rate relates;

c

the level of consolidation which applies in the calculation of the third country buffer; and

d

the justification for its decision under regulation 34D(1).

3

The PRA must not publish information under paragraph (1)(b) or (2)(d) if publication might jeopardise the stability of the financial system.

4

Where the PRA revokes a requirement that a relevant entity apply a third country buffer rate under regulation 34D, it must publish—

a

the fact that the requirement has been revoked;

b

the justification for its decision to revoke the requirement; and

c

the date from which the relevant entity may cease to apply the third country buffer rate.

Review34K

The PRA must review the following matters at least once every second year—

a

the decision to require a relevant entity or class of relevant entities to maintain a systemic risk buffer under regulation 34C(1);

b

a buffer rate set under regulation 34C(2);

c

the exposures, or subset of exposures, to which that buffer rate is applied;

d

a decision that a relevant entity must maintain a third country buffer under regulation 34D;

e

a decision as to the level of consolidation to apply in relation to the application of a third country buffer rate under regulation 34D(3).

Appeals34L

1

A person who is aggrieved by a decision of the PRA under regulation 34C may refer the matter to the Tribunal.

2

The scope of such an appeal is limited to the buffer rate set under regulation 34C(2).

Article 4ADefinitions: Regulators' rules

1

In these Regulations—

a

a reference to the PRA rulebook is to the rulebook published by the PRA containing rules made by that Authority under FSMA as the rulebook has effect on F77IP completion day;

b

any reference to a sourcebook is to a sourcebook in the Handbook of Rules and Guidance published by the FCA containing rules made by that Authority under FSMA as the sourcebook has effect on F77IP completion day;

c

“Directive 2013/36/EU UK law” means the law of the United Kingdom or any part of it, which was relied on by the United Kingdom immediately before F77IP completion day to implement Directive 2013/36/EU and its implementing measures—

i

as they have effect on F77IP completion day, in the case of rules made by the FCA or the PRA under FSMA; and

ii

as amended from time to time, in all other cases.

2

By way of an exception to paragraph 1(c), for the purposes of F82Articles 4(1)(25), 11(2) and (6), 81(1)(ii), 82(a)(ii), 336(4)(c), 468(4) and 473a(7a), and the references to the Directive 2013/36/EU therein, “Directive 2013/36/EU UK law” shall mean the law of the United Kingdom or any part of it, which was relied on by the United Kingdom immediately before F77IP completion day to implement Directive 2013/36/EU and its implementing measures as amended from time to time. F21.

Article 4BDetermination of the consolidating supervisor

1

The identity of the consolidating supervisor is to be determined in accordance with paragraph (3) and, where applicable, paragraph (4).

2

In this Article—

• “Case 1” means circumstances where a PRA-authorised person is the UK parent institution required by Chapter 2 of Title 2 of Part 1 of the capital requirements regulation to comply with requirements of the regulation on a consolidated basis, other than circumstances falling within Case 3;

• “Case 2” means circumstances where an FCA-authorised person is the UK parent institution required by Chapter 2 of Title 2 of Part 1 of the capital requirements regulation to comply with requirements of the regulation on a consolidated basis, other than circumstances falling within Case 3;

• “Case 3” means circumstances where a UK parent financial holding company or UK parent mixed financial holding company has a subsidiary institution which is a PRA-authorised person;

• “Case 4” means circumstances where none of the institutions controlled by a UK parent financial holding company or UK parent mixed financial holding company which are required by Chapter 2 of Title 2 of Part 1 of the capital requirements regulation to comply with requirements of the regulation on a consolidated basis, is a subsidiary institution which is a PRA-authorised person.

3

The consolidating supervisor is—

a

in Case 1, the PRA;

b

in Case 2, the FCA;

c

in Case 3, the PRA; and

d

in Case 4, the FCA.

4

The FCA and PRA may by agreement vary the determination of the consolidating supervisor provided for in paragraph (3) in its application to particular circumstances.

5

The FCA and PRA may exercise the power in paragraph (4) where they consider that the outcome of paragraph (3) would be inappropriate in the circumstances, having regard to the importance of the activities of the PRA-authorised persons and the FCA-authorised persons concerned.

6

An agreement under paragraph (4) must be in or confirmed in writing.

ii

an undertaking which is subject, by virtue of the applicable national law of the United Kingdom, or any part of it, or of a third country, to the requirements of this Regulation and Directive 2013/36/EU UK law;

ii

an undertaking which is subject, by virtue of the applicable national law of the United Kingdom, or any part of it, or of a third country, to the requirements of this Regulation and Directive 2013/36/EU UK law;