EXPLANATORY NOTE

(This note is not part of the Regulations)

The primary purpose of this instrument is to make amendments to legislation that are consequential on changes made by sections 1 to 5 of, and Schedules 1 to 4 to, the Financial Services Act 2021 (c. 22) (the “Act”).

This instrument also revokes some provisions of Regulation (EU) 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms (known as the Capital Requirements Regulation or “CRR”) using section 3 of the Act. These provisions will be replaced by rules to be made by the Prudential Regulation Authority (“PRA”).

The rules made by the PRA to replace the provisions of the CRR revoked by this instrument can be found at https://www.bankofengland.co.uk/prudential-regulation and a copy can be obtained from the Prudential Regulation Authority, 20 Moorgate, London EC2R 6DA. Section 5(3) of the Act makes provision for certain references in the CRR to revoked provisions of the CRR to be read as references to corresponding rules made by the PRA (referred to in the Act as “CRR rules”). Under section 5(4) of the Act, the PRA has prepared a document setting out whether and how the proposed CRR rules correspond to the provisions of the CRR revoked by this instrument. This document is published at https://www.bankofengland.co.uk/prudential-regulation and a copy can be obtained from the Prudential Regulation Authority, 20 Moorgate, London EC2R 6DA.

HM Treasury are also exercising powers in the Bank of England Act 1998 (c. 11), the Banking Act 2009 (c. 1) and the Financial Services and Markets Act 2000 (c. 8) (“FSMA”) in order to update related elements of the prudential regimes for credit institutions and investment firms.

Provisions contained in regulations 12, 17, 24, 26, 28 and 31 of this instrument are made in exercise of the powers in section 8(1) of, and paragraph 21 of Schedule 7 to, the European Union (Withdrawal) Act 2018 (c. 16) in order to address failures of retained EU law to operate effectively, and other deficiencies arising from the withdrawal of the United Kingdom from the European Union (and in particular, the deficiencies under paragraphs (a) and (g) of section 8(2) of that Act).

Part 2 of this instrument makes amendments to primary legislation and Northern Ireland legislation.

Part 3 of this instrument makes amendments to secondary legislation. In particular, regulation 15 amends the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556). That Order specifies, for the purposes of FSMA, which regulated activities are “PRA-regulated activities”.

Part 4 of this instrument makes amendments to retained EU law.

Part 5 of this instrument makes amendments to the Capital Requirements Regulation Equivalence Directions 2020.

Part 6 of this instrument makes amendments to the Capital Requirements Regulation (Amendment) Regulations 2021 (S.I. 2021/1078).

Part 7 of this instrument exercises a power to remove certain investment firms from the definition of “investment firm” in the Banking Act 2009 (c. 1).

Part 8 of this instrument makes savings provision in respect of powers in Article 124(4) of the CRR to make, revoke and amend technical standards, and transitional provision in respect of Regulation (EU) 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation.

A full impact assessment has not been produced for this instrument, as no, or no significant, impact on the private, voluntary or public sector is foreseen. A de minimis impact assessment is available from HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ and is published with the Explanatory Memorandum alongside this instrument on www.legislation.gov.uk.