On 21 October 2026, The Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026 were made.
Background
The UK Capital Requirements Regulation (UK CRR) was revoked by the Financial Services and Markets Act 2023 subject to commencement by HM Treasury (HMT). This revocation allows detailed, firm-facing regulatory requirements to be set by regulators within an overall policy framework set by Government and Parliament. This approach is known as the ‘FSMA model’ of regulation.
The Government is using this statutory instrument (SI) to restate in legislation the equivalence provisions that are currently set out in the UK CRR and which need to be maintained in legislation in line with its approach to Overseas Recognition Regimes. The SI does this by restating the existing UK CRR equivalence regimes in legislation as one Overseas Prudential Requirements Regime (OPRR).
Summary
The OPRR preserves the overall scope and effect of existing equivalence regimes. The SI also preserves existing equivalence decisions, including the overall scope and effect of those decisions, by treating them as if they were HMT designations under the new OPRR. Further designations under the OPRR will require a subsequent SI and parliamentary approval.
The SI also extends the scope of the OPRR to include an additional type of exposure, enabling the future recognition of overseas eligible covered bonds. It also amends the effect of designations for the purposes of exchanges under the regime.
As a result, UK institutions can treat exposures to overseas exchanges as exposures to institutions, where this is permitted by the banking regulator in the designated overseas jurisdiction. Where this condition is not met, the Prudential Regulation Authority will be able to set capital requirements for exposures to exchanges in a manner which more accurately reflects the underlying risk of the exposure. Typically, they will be treated as exposures to corporates.
Timing
The SI comes into force on 1 January 2027.