Financial Services And Markets PART 1 Introductory provisions Citation, commencement and expiry 1 1 These Regulations may be cited as the Capital Requirements Regulations 2013. 2 Subject to paragraph (3), these Regulations come into force on 1st January 2014. 3 The Regulations specified in the first column of Schedule 1 (CRD transitional arrangements) come into force on the dates specified in the second column or cease to have effect on the dates specified in the third column. Interpretation 2 1 In these Regulations— ... ... ... “ capital requirements regulation ” means Regulation ( EU ) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 ; “ on a consolidated basis ” means on the basis of the consolidated situation; “ consolidated situation ” means the situation that results from an entity being treated, for the purposes of the capital requirements regulation or CRR rules (as appropriate), as if that entity and one or more other entities formed a single entity; “ CRR rules ” has the meaning given in section 144A of FSMA; ... ... ... ... ... ... ... “ FSMA ” means the Financial Services and Markets Act 2000; “ group ” means a group whose members include one or more institutions; ... ... ... ... ... ... ... “ Specified EU Regulations under the Capital Requirements Regulation ” means the EU regulations or parts of EU regulations which form part of assimilated law and which are specified in paragraphs 78 to 83 and 126 to 168, in Schedule 1 to the Financial Regulators' Powers (Technical Standards) (Amendment etc.) (EU Exit) Regulations. 2 Except as provided by paragraph (1)— a any expression used in these Regulations which is defined in Article 4 (definitions) of the capital requirements regulation ... has the meaning which it is given in that Article ; b any other expression used in these Regulations which is defined in section 417 (definitions) of FSMA has the meaning given by that section . 3 Any reference in these Regulations to any EU regulation, EU decision or EU tertiary legislation (within the meaning of section 20 of the European Union (Withdrawal) Act 2018) is, unless the contrary intention appears, to be treated as a reference to that EU regulation, EU decision or EU tertiary legislation as it forms part of assimilated law . Interpretation: regulators' rules 2A 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 1 January 2022 ; b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . c “ Directive 2013/36/EU UK law ” means the law of the United Kingdom which was relied on by the United Kingdom immediately before IP completion day to implement the capital requirements directive and its implementing measures— i as they have effect on 1 January 2022 , 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 IP completion day to implement Directive 2013/36/EU and its implementing measures as amended from time to time. PART 2 Capital Requirements Regulations 2006: revocation Capital Requirements Regulations 2006: revocation 3 The Capital Requirements Regulations 2006 are revoked. PART 3 Designation of competent authorities Main provisions of the capital requirements regulation and Directive 2013/36/EU UK law 4 For the purposes of every provision of Directive 2013/36/EU UK law and the capital requirements regulation— a the PRA is responsible for— i all the functions of a competent authority in respect of PRA-authorised persons and financial holding companies and mixed financial holding companies approved or designated by the PRA under— aa Part 12B of FSMA, or bb regulation 5 of the Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020; ii the application of Article 124(2) and Article 164(6) of the capital requirements regulation; b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital buffers and Article 458 of the capital requirements regulation 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART 4 PRA and FCA: cooperation and co-ordination Co-operation within the European System of Financial Supervision 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Co-operation with EBA 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Information gathering, planning and co-ordination duties 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Requirement to consult other competent authorities: major sanctions or exceptional measures 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Emergency situations: notification requirements 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Collaboration concerning supervision of cross-border institutions 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . On-the-spot checks and inspections: during CRD transitional period 12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . On-the-spot checks or inspections: after CRD transitional period 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . On-the-spot checks and inspections: powers of EEA competent authorities 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Significant branches: UK is the host EEA State 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Significant branches: UK is the home EEA State or EEA consolidating supervisor 16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Duties to notify EBA and EIOPA 17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART 5 Publication of information by PRA and FCA General disclosures required of PRA and FCA 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Specific disclosures required of PRA and FCA 19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART 6 Consolidated supervision Determination of the consolidating supervisor 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Assessment of equivalence of consolidated supervision by supervisory authorities in third countries 21 1 In this regulation, a “relevant institution” is an institution which satisfies the following conditions— a the institution is authorised by the PRA ... b the parent undertaking of the institution is an institution, financial holding company or mixed financial holding company whose head office is not located in the United Kingdom ; c the institution is not subject to supervision on a consolidated basis by the ... PRA ; d the PRA ... would (but for paragraph (4)) be responsible for supervision of the institution on a consolidated basis; and e either— i the parent undertaking of the institution, or any regulated entity established in the United Kingdom which is a member of the same group as the institution, has requested the assessment referred to in paragraph (2) be carried out; or ii the PRA ... has decided on its own initiative to carry out that assessment. 2 The PRA must assess whether a relevant institution is subject to supervision on a consolidated basis by a supervisory authority of a country outside the United Kingdom which is equivalent to the standard of supervision on a consolidated basis applied by the PRA in accordance with Directive 2013/36/EU UK law, the capital requirements regulation and CRR rules. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Where the PRA concludes that a relevant institution is not subject to equivalent supervision in accordance with paragraph (2), the PRA may apply— a the requirements of Directive 2013/36/EU UK law , the capital requirements regulation and CRR rules to the institution, amended as necessary; or b other appropriate supervisory techniques, which must be designed to achieve the objectives of supervision on a consolidated basis ... 5 The other appropriate supervisory techniques referred to in paragraph (4) may include a requirement on the institution to establish a financial holding company or mixed financial holding company with its head office in the United Kingdom , so that supervision on a consolidated basis may be applied in relation to the consolidated situation of that holding company. 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Co-ordination and co-operation arrangements 22 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Co-ordination of supervisory activities by the EEA consolidating supervisor 23 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Bank's general duties 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exchange of information 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Obtaining information already disclosed 26 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Verification of information by a competent authority in another EEA State 27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Requirement to establish list of holding companies 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joint decisions on own funds: PRA or FCA is the EEA consolidating supervisor 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joint decisions on own funds: PRA or FCA is not the EEA consolidating supervisor 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joint decision on liquidity: PRA or FCA is the EEA consolidating supervisor 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Joint decision on liquidity: PRA or FCA is not the EEA consolidating supervisor 32 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Colleges of supervisors 33 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART 7 Exercise of supervision by the PRA ... Supervisory powers: own funds 34 1 The PRA ... must require an institution to hold own funds in excess of— a the requirements of Directive 2013/36/EU UK law which implemented Chapter 4 of Title 7 of the capital requirements directive; and b the requirements of the capital requirements regulation and CRR rules relating to risks or elements of risks not covered by Article 1 of the capital requirements regulation or CRR rules; in the circumstances mentioned in paragraph (2). 2 The circumstances referred to in paragraph (1) are— a an institution does not meet the requirements set out in Directive 2013/36/EU UK law which implemented Articles 73 and 74 of the capital requirements directive or in Article 393 of the capital requirements regulation; b risks or elements of risks are not covered by the own funds requirements set out in Directive 2013/36/EU UK law which implemented Chapter 4 of Title 7 of the capital requirements directive , the capital requirements regulation or CRR rules ; c the sole application of other administrative measures is unlikely to improve the institution's arrangements, processes, mechanisms and strategies sufficiently within an appropriate timeframe; d either a SREP or an internal model review reveals that non-compliance with the requirements for the applicable internal approaches will likely lead to inadequate own funds requirements; e the risks are likely to be underestimated despite compliance with the applicable requirements of Directive 2013/36/EU UK law , the capital requirements regulation or CRR rules ; or f an institution reports to the competent authority in accordance with Article 377(5) of the capital requirements regulation that the stress test results referred to in that Article materially exceed its own funds requirement for the correlation trading portfolio. 3 For the purposes of determining the appropriate level of own funds on the basis of a SREP , the PRA ... must assess whether any imposition of an additional own funds requirement in excess of the own funds requirement is necessary to capture risks to which an institution is or might be exposed, taking into account the following: a the quantitative and qualitative aspects of the institution's assessment process referred to in Directive 2013/36/EU UK law which implemented Article 73 of the capital requirements directive; b the institution's arrangements, processes and mechanisms referred to in Directive 2013/36/EU UK law which implemented Article 74 of the capital requirements directive; and c the outcome of the SREP or internal model review ; ... d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 In this Part— “ internal model review ” means a review carried out under regulation 34B; “ SREP ” means the supervisory review and evaluation process detailed in regulation 34A. Supervisory review and evaluation process 34A 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 , the capital requirements regulation and CRR rules and evaluate— a 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 approaches 34B 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 and CRR rules . 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 ... for applying that ... 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. Specific liquidity requirements 35 For the purposes of determining the appropriate level of liquidity requirements on the basis of a SREP , the PRA must assess whether the imposition of a specific liquidity requirement is necessary to capture liquidity risks to which an institution is or might be exposed, taking into account the following— a the particular business model of the institution; b the institution's arrangements, processes and mechanisms (as referred to in Directive 2013/36/EU UK law which implemented Section 2 of Chapter 2 of Title 7 to the capital requirements directive, in particular in Article 86); c the outcome of the SREP ; and d any systemic liquidity risk that threatens the integrity of the financial markets of the United Kingdom. Application of supervisory measures to institutions with similar risk profiles 35A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supervisory powers 35B 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 , CRR rules 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 authority 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 requirements 35C 1 The competent authorities may require institutions to— a publish information referred to in the Disclosure (CRR) Part of the PRA Rulebook 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. Employee remuneration 36 1 The PRA must— a collect the information disclosed by institutions in accordance with the criteria for disclosure set out at points (g), (h) and (i) of Article 450(1) of the capital requirements regulation and use it to benchmark remuneration trends and practices; b collect information on the number of employees in each institution that are remunerated 1 million euros or more per financial year, in pay brackets of 1 million euros, including their job responsibilities, the business area involved and the main elements of salary, bonus, long-term award and pension contribution; c collect the information disclosed by institutions about any decisions taken by their shareholders, owners or members to approve a higher ratio between the fixed and variable components of remuneration approved in accordance with applicable remuneration rules and use it to benchmark practices in relation to the level of such ratios; ... d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 In paragraph (1)(c) “ applicable remuneration rules ” means rule 15.10 of the Remuneration Part of the PRA Rulebook Diversity practices 37 The PRA must— a collect the information disclosed by institutions in accordance with Article 435(2)(c) of the capital requirements regulation and use it to benchmark diversity practices; ... b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Consultation with EBA: supervisory benchmarking of internal approaches for calculation own funds requirements 38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PART 8 Permissions under the CRR Meaning of “permission” and “protected item” in this Part 39 1 In this Part— “ permission ” means a decision made by the PRA in relation to an institution under a power conferred on the PRA by— the capital requirements regulation; ... section 144G of FSMA and CRR rules (as defined in Part 9D of FSMA); section 192XC of FSMA and section 192XA rules (as defined in Part 12B of FSMA); any of the Specified EU Regulations under the Capital Requirements Regulation, as amended from time to time; or a technical standard made by the PRA ... under the functions conferred on them by the Capital Requirements Regulation as amended by Part 4, Chapter 3 of the Capital Requirements (Amendment) (EU Exit) Regulations 2018. “ protected item ” has the same meaning as in section 413 of FSMA. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Applications for permissions: process, information and documents 40 1 This regulation applies to an application to the PRA for— a the grant of a permission; b an amendment to an existing permission; c an amendment to a condition to which an existing permission is subject. 2 An application must— a be made in such manner as the PRA may direct; and b contain, or be accompanied by, such other information or documents as the PRA may reasonably require. 3 At any time after receiving the application and before determining it, the PRA may require the applicant to provide it with such further information or documents as it may reasonably require. 4 The PRA may require any information provided under this regulation to be provided in such form and verified in such manner as it may reasonably require. 5 The PRA may require any documents provided under this regulation to be produced at such place and authenticated in such manner as it may reasonably require. 6 Different directions may be given, and different requirements imposed, in relation to different applications or categories of application. 7 The powers conferred on the PRA by this regulation may not be used to require the production of a protected item. Decisions: written notices 41 1 On determining an application for the grant of a permission, the PRA must give the applicant a written notice stating— a its decision; and b if the permission is granted, any conditions to which the permission is subject and the date on which the permission takes effect. 2 Where the PRA varies or revokes a permission, it must give the institution concerned a written notice stating— a that the permission is varied or revoked; and b the date on which the variation or revocation takes effect. 3 Where the PRA amends a condition to which a permission is subject, it must give the institution concerned a written notice stating— a the amended condition; and b the date on which the amendment takes effect. Appeals 42 1 Where an applicant is aggrieved at the determination of an application for the grant of a permission, it may refer the matter to the Tribunal. 2 Where an institution has been granted a permission and is aggrieved at the variation or revocation of the permission or the amendment of a condition to which the permission is subject, it may refer the matter to the Tribunal. 3 Part 9 of FSMA (hearings and appeals) applies to a reference to the Tribunal under this regulation as it applies to a reference to the Tribunal under an Act. Publication of written notices 43 1 Subject to paragraph (2), the PRA must publish a relevant notice in the way appearing to the PRA to be best calculated for bringing it to the attention of— a persons likely to be affected by it; and b persons who are, in the opinion of the PRA , likely to make an application for a similar permission. 2 Paragraph (1) does not apply if— a the relevant notice relates to an application for a permission which has been refused; or b the PRA is satisfied that it is inappropriate or unnecessary to publish the relevant notice. 3 In deciding whether it is satisfied of the matters mentioned in paragraph (2)(b), the PRA must consider whether— a publication would prejudice, to an unreasonable degree, the commercial interests of the person concerned or any other member of the person's immediate group; b publication of the relevant notice without mentioning the identity of the person concerned might avoid any adverse consequence of publication. 4 In this regulation, “ relevant notice ” means a written notice— a given under regulation 41 in relation to a decision of the PRA ; or b stating that an event referred to in paragraph (5) has occurred in relation to that decision. 5 The events mentioned in paragraph (4)(b) are— a the decision has been referred to the Tribunal; b the decision has been suspended by the Tribunal; c any suspension of the decision has been revoked by the Tribunal; d the reference has been dismissed by the Tribunal. Transitional provision for matters done before commencement 44 1 This regulation applies to a decision made before 1st January 2014 to— a refuse an application for the grant of a permission; b vary or revoke a permission; or c amend a condition to which a permission is subject. 2 Regulations 40 to 43 apply to such a decision with the following modifications— a omit regulation 40; b the appropriate regulator must comply with the requirements of regulations 41 and 43 in relation to the decision no later than 1st January 2014; and c regulation 42 applies to the decision, but with the period of time within which a reference may be made to the Tribunal commencing on 1st January 2014. PART 9 Misleading the PRA or FCA Misleading the PRA or FCA 45 Section 398 of FSMA (misleading FCA or PRA: residual cases) applies to a requirement imposed by or under— a the capital requirements regulation; b any of the Specified EU Regulations under the Capital Requirements Regulation, as amended from time to time; ba a technical standard made by the PRA or FCA under the functions conferred on them by the Capital Requirements Regulation as amended by Part 4, Chapter 3 of the Capital Requirements (Amendment) (EU Exit) Regulations 2018; or c these Regulations; as it applies to a requirement imposed by or under FSMA. PART 10 Amendments and revocations Amendments and revocations 46 1 Schedule 2, which contains amendments to primary and secondary legislation, has effect. 2 Schedule 3, which contains revocations of secondary legislation, has effect. David Evennett Mark Lancaster Two of the Lords Commissioners of Her Majesty's Treasury