January 2021 Regulation Update

EBA Taxonomy 3.0 CRR2

Whistlebrook understands that implementation of Capital Requirements Regulation (CRR2) in the UK is to be delayed until 1 January 2022. It had been expected that this taxonomy would be effective from 30 June 2021. The delay was communicated by the PRA in a statement issued on 16 November 2020.

Therefore on the basis of this publication, Whistlebrook will not support EBA taxonomy 3.0 until January 2022.

Regulatory Form Changes

For report reference date 30 June 2021, Mortgage Product Sales Data forms PSD001 and PSD007 will include amendments as required by the regulator.

PSD001

The data required are being extended to include:

  • Internal product transfers
  • Further advances
  • Second charge lending
  • Contractual reversion rate
  • Rate at which affordability ‘stress test’ was performed

PSD007

Details of the legal owner of the loan book that is being administered by the reporting firm.

Treatment of Software Assets

For PRA regulated firms, the need to fully deduct software assets from Common Equity Tier One capital is not required with effect from 23 December 2020. However, Whistlebrook understands that the change in regulatory treatment may be temporary in the UK.

It is understood that for software assets that are prudently valued, not considered as prone to a material decrease in value as a result of a firm’s failure and are available for use, the following treatment can be applied.

The deduction from CET1 can be limited to the positive value remaining after reducing the Prudential Amortisation by the Accounting Amortisation and Impairment Losses on the software.

The Gross Carrying Amount less the Accumulated Prudential Amortisation is required to be risk weighted at 100%.

If the software is not yet available for use then a full deduction is necessary from Common Equity Tier One capital

Further details are available in EU Official Journal 2020-2176.

MREL

A discussion paper issued by the Bank of England in December 2020, advised that ‘mid-tier’ firms subject to MREL must be compliant with the final requirement by 1 January 2023 rather than 1 January 2022.

FSCS Deposit Protection Temporary High Balances

The extended protection of temporary high balances (retail deposits) is applicable to deposits made before 1 February 2021.

Therefore Whistlebrook understands that qualification for the longer term protection (for balances up to £1million protected for twelve months rather than six) will close shortly.

UK Investment Firms

A new regulatory framework for MifiD authorised, UK investment firms that are regulated by the FCA only, will be effective from 1 January 2022. The FCA issued a consultation paper 20-24 with further details.

Gabriel Replacement

The FCA collection system, Gabriel, is to be replaced by RegData. Firms will be advised (by the regulator) three weeks before the time that they are to be moved over to the new system. For Wires users, direct submission will not change. Therefore clients will be unaffected. Only the portal is changing.

OSCA Replacement

The Bank of England’s BEEDS system will replace OSCA. Appropriate changes will be made for Wires users to accommodate the regulator’s requirements. It is expected that by September 2021, some firms will be submitting to BEEDS, with all reporters doing so in January 2022.

This regulatory update is Whistlebrook’s understanding of the position as at 26th January 2021.