* HM Treasury Guidance HMT STATEMENT ON APPLICABILITY OF COVID-19 RELATED AMENDMENTS TO CAPITAL REQUIREMENTS REGULATIONS Published 16 July 2020 © Crown copyright 2020 This publication is

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forward a package of legislative measures at the onset of the Covid-19 pandemic. These measures amend Regulations (EU) 575/2013 and (EU) 2019/876 also known as the Capital Requirements

Regulation (CRR) and the Second Capital Requirements Regulation (CRRII) respectively. The final legislative text as set out in Regulation (EU) 2020/873 entered the EU Official Journal on 26

June 2020. As this date falls within the Transition Period, any directly applicable provisions will automatically form part of retained EU law under the EU (Withdrawal) Act 2018. Previously,

the Treasury made the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (SI2019/1232), using powers under the European Union (Withdrawal) Act 2018 (as amended by the European

Union (Withdrawal Agreement) Act 2020), to address deficiencies in the CRR, as amended by CRR II, to ensure that it continues to operate effectively in the UK once it forms part of retained

EU law at the end of the Transition Period – a process referred to as “onshoring”. The Treasury will use the same powers to address any deficiencies arising from the relevant provisions of

Regulation (EU) 2020/873, ensuring these elements of retained EU law operate effectively in the UK at the end of the Transition Period. The approach aligns with the wider work of the

Treasury to ensure that the UK has an independent and coherent financial services regulatory regime at the end of the Transition Period; it is not intended to make policy changes, other than

to reflect the UK’s position outside the EU. PROVISIONS THAT WILL BE ONSHORED The table below sets out the provisions within Regulation (EU) 2020/873 that became applicable on 27 June 2020

and therefore will form part of retained EU law at the end of the Transition Period. RELEVANT ARTICLES IN REGULATION (EU) 2020/873 DESCRIPTION OF REQUIREMENT/DISCRETION Article 1(1)

Extension of preferential prudential treatment to non-performing loans guaranteed by Covid government schemes Article 1(6) Re-introduction of a temporary prudential filter for public sector

exposures from 1 January 2020 to 31 December 2022 Article 1(7) Extending transitional arrangements for mitigating the impact of IFRS9 provisions on regulatory capital Article 1(9) Temporary

treatment of public debt issues in the currency of another Member State until 31 December 2024 Article 1(9) Temporary exclusion of certain exposures to central banks from the total exposure

measure in view of the COVID-19 pandemic until 27 June 2021 Article 1(9) Exclusion of overshootings from the calculation of the back-testing addend in view of the COVID-19 pandemic Article

1(9) Temporary calculation of the exposure value of regular-way purchases and sales awaiting settlement in view of the COVID-19 pandemic, until 27 June 2021 Article 1(10) Mandate for a

report from the Commission on overshootings and supervisory powers to limit distributions Article 2(1) Application date brought forward for provisions on the treatment of certain loans

granted by credit institutions to pensioners or employees laid down in Article 123 of Regulation (EU) 575/2013 as amended by Regulation (EU) 2019/876 Article 2(1) Application date brought

forward for provisions on adjustment of risk-weighted non-defaulted SME exposures laid down in Article 501 of Regulation (EU) 575/2013 as amended by Regulation (EU) 2019/876 Article 2(1)

Application date brought forward for provisions on adjustment to own funds requirements for credit risk for exposures to entities that operate or finance physical structures or facilities,

systems and networks that provide or support essential public services laid down in Article 501a of Regulation (EU) 575/2013 as amended by Regulation (EU) 2019/876 Article 2(3)[footnote 1]:

Provisions on the exemption from deductions of prudently valued software assets will apply from the date of entry into force of the regulatory technical standards referred to in Article

36(4) of Regulation (EU) 575/2013 as amended by Regulation (EU) 2019/876 PROVISIONS THAT WILL NOT BE ONSHORED The following table sets out provisions within Regulation (EU) 2020/873, which

will become retained EU law under the European Union (Withdrawal) Act 2018 (as amended by the European Union (Withdrawal Agreement) Act 2020), and will not be applicable in the UK as they

apply after the end of the Transition Period. RELEVANT ARTICLES IN REGULATION (EU) 2020/873 DESCRIPTION OF REQUIREMENT/DISCRETION Article 1(4) Amendments to article 429a, as amended by

Regulation (EU) 2019/876 setting out the basis on which central bank exposures (CBEs) may be excluded from the calculation of the leverage ratio Article 2(2) Requirement for own funds for

G-SIIs (Globally Systemically Important Institutions) laid down in Article 92(1a) of Regulation (EU) 575/2013, will apply from 1 January 2023 Regarding the provisions which will not apply

before the end of the Transition Period, matters relating to the leverage ratio and G-SII requirements are for the Financial Policy Committee (FPC) and Prudential Regulation Authority (PRA)

to consider as part of the FPC-PRC leverage ratio framework. * Article 36(4) requires the European Banking Authority (EBA) to develop draft regulatory technical standards. If the associated

regulatory technical standards enter into force before the end of the Transition Period, they will form part of retained EU law. In the event they enter into force after this date, they will

not apply in the UK. ↩ Back to top