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, Solvency II and EMIR.
HM Treasury will be able to make equivalence determinations in relation to several equivalence provisions contained in the onshored CRR, Solvency II and EMIR. Existing equivalence determinations in relation to CRR, Solvency II and Article 13 of EMIR made by the European Commission, are also onshored and retained. This means that these equivalence determinations will continue to apply in the UK after the end of the transition period, 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 the end of the transition period. Schedule 2 to these Regulations lists the European Commission Tertiary Legislation that has been retained, including the existing equivalence determinations made by the European Commission under CRR and Solvency II.
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. On 17 October 2019, HM Treasury, the Bank of England and the FCA published a Memorandum of Understanding (MoU) setting out how the parties expect to coordinate their respective functions in relation to equivalence and exemption determinations.
This framework will apply from the end of the transition period to those third country equivalence determinations which would previously have been 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.