March 2021 Regulation Update

Key Regulatory Changes 2021

The high priority regulatory changes to be accommodated in 2021 are:

  • Implementation of UK CRR2 under EBA taxonomy 3.0 framework
  • New Bank of England taxonomy 3.4.0.0 in association with the replacement of OSCA by BEEDS
  • UK Investment Firms Prudential Regime (understood as still being at the consultation stage and having an effective date of 1 January 2022)
  • Gabriel replacement. As at March 2021, only the portal is being changed and the effect will be on manual uploads. Direct transmissions will be unaffected for the time being.

The appropriate development will be made in Wires to include the changes.

EBA Taxonomy 3.0 Phase Two Update

The European Banking Authority published changes to phase two of its taxonomy 3.0, which is effective in the UK from 1 January 2022. The main effects of this update are a minor change to Asset Encumbrance F 32.04 and more validation rules for implementation.

The taxonomy also refers to new MREL templates (M 01 .00 to M 07.00 and M 20.00) as well as the Notification of Impracticality of Bail-in (N 01.00, N 01.01, N 01.02 and N 02.00) forms. The FCA has confirmed that these returns will not be applicable in the UK.

As Wires will support the taxonomy that is implemented in the UK, the aforementioned templates will not be included in the product.

Further details are available in https://www.eba.europa.eu/eba-updates-phase-2-its-30-reporting-framework.

BoE Reporting Changes

Taxonomy 3.4.0.0

The final version of this taxonomy is expected to be published in late July / early August. There is currently no specific report reference date upon which this taxonomy is to be effective, but it will be included in the Wires product for use at the appropriate time.

BEEDS Interface

Direct submission to BEEDS (once it has replaced OSCA) will require an interface. Once that interface has been provided by the Bank of England, changes will be made to Wires to allow firms to submit, without manual intervention, to BEEDS. The timing of such development is dependent on the availability of the interface from the Bank.

Other Changes

It is understood that all the Bank of England forms will be subject to layout amendments and submissions will be in XBRL format, rather than XML as currently. Validation rules are to be “optimised” and as a result, the number of them is expected to fall.

Internal Ratings Based Approach and UK Mortgage Risk Weights

In 2020, the Prudential Regulation Authority issued consultation paper 14-20. It was proposed that with effect from 1 January 2022, where internal models are used to calculate the credit risk weighted exposure, the following minima will apply:

  • 7% risk weight on each exposure
  • An exposure weighted average risk weight of 10%

Whistlebrook understands that this proposal has not progressed further as yet. The view of UK Finance was that “…flooring mortgage risk weights is not the appropriate way to achieve the PRA’s objectives”.

Strong and Simple Regulation

There is an intention to introduce more proportional regulatory requirements on smaller firms in the UK. A discussion paper is expected from the Prudential Regulation Authority in the first half of this year.

This regulatory update is Whistlebrook’s understanding of the position as at 29th March 2021.