HM Treasury (HMT) has launched a consultation seeking views on the proposed exercise of the delegated powers provided to HMT by the Financial Services Bill to ensure the effective implementation of the Investment Firms Prudential Regime.

  • Amendments to the macro-prudential framework: The expected enactment of the FS Bill and associated secondary legislation means certain elements of the macro-prudential legislative framework, in relation to the FPC’s powers of direction, will require amendments to reflect the new regime. This will include seeking to ensure the macro-prudential measures appropriately reflect clauses introduced under the FS Bill in relation to holding companies, and that relevant references in legislation are appropriately updated. For example, the Government intends to amend Order 2015/905, which gives the FPC powers of direction over the leverage ratio, so that the “total exposure measure” is no longer defined by reference to the CRR.
  • Introduction of prudential regime: for investment firms. The IFPR Financial Services Bill legislation contains a limited number of delegated powers for HM Treasury to exercise to ensure the effective implementation of the regime. The consultation seeks views on the suggested exercise of these powers, with a focus on definitions regarding the entities within a group structure to whom the rules may apply on a consolidated basis. The consultation also also seeks views on consequential changes to the statute book, in particular to the Financial Services and Markets Act (PRA-Regulated Activities) Order 2013, (PRA RAO), as a result of changes to the level of initial minimum capital for investment firms, which will be set in the FCA rules. Many other transitional and consequential changes will be needed to the statute book to properly transfer UK over to the new IFPR.

This will include consequential changes to the UK primary legislation, secondary legislation, and retained EU law. HM Treasury plans to make these other changes at the same time as the changes discussed in this consultation. However, HM Treasury does not plan to consult on these changes as they are not expected to be substantive.

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