7. Technical equivalence decisions under the CRR and Solvency II
Some EU financial services legislation contain provisions which allow the European Commission to determine that a non-EU country (“or third country”) has a regulatory and supervisory regime that is equivalent to the EU’s corresponding regulatory framework, including the CRR and Solvency II.
HM Treasury have onshored several equivalence provisions contained in CRR and Solvency II using powers in the EU Withdrawal Act 2018. Using these powers, HM Treasury have also onshored and retained existing equivalence determinations that have previously been made by the European Commission. This means that these equivalence determinations will continue to apply in UK law after the UK has exited the European Union, ensuring continuity. The retained equivalence determinations have been amended by the Equivalence Provisions for Financial Services and Miscellaneous Provisions (Amendments etc.) (EU Exit) Regulations 2019 so that they continue to be operable after exit. Schedule 2 of the SI lists the European Commission Tertiary Legislation that have been retained, including the existing equivalence determinations made by the European Commission under CRR and Solvency II.
The onshored Solvency II equivalence provisions are retained in the Solvency 2 and Insurance (Amendments etc.) (EU Exit) Regulations 2019.
The onshored CRR equivalence provisions are retained in the Capital Requirements (Amendments etc.) (EU Exit) Regulations 2019.
Further information about the UK’s future framework for making equivalence determinations, including the respective roles of HM Treasury and the UK regulatory authorities, including the PRA, is contained in the explanatory memorandum to the Equivalence Provisions for Financial Services and Miscellaneous Provisions (Amendments etc.) (EU Exit) Regulations 2019.
This framework will apply from exit day to those third country equivalence determinations previously made by the European Commission. It does not apply to the PRA’s existing approach to authorising and supervising international bank branches as described in Supervisory Statement (SS)1/18, and insurance branches, as described in SS2/18.
Further information on the future framework for technical equivalence decisions under CRR and Solvency II will be provided by the PRA in due course.