British authorities have announced that new capital rules targeting banks alongside investment banks will take effect at the start of 2022. The implementation has been postponed by six months to give financial institutions more time to prepare.
Initially, the deadline was set in June 2021, as issued by the European Union. As part of Britain’s exit from the EU, the deadline was to allow the region to put in place its version of financial regulations.
Under the expected new rules, there is the Britain Investment Firms Prudential Regime that covers capital requirements for investment firms. There are also some changes to the capital requirements agreed globally by the Basel Committee. The agreements were in reaction to the 2009 financial crisis.
The Bank of England, the Finacial Conduct Authority, and the finance ministry noted that to accommodate the two changes, January 1st, 2022, was the perfect date.
The delay is due to feedback from the industry. Stakeholders had raised concerns about the general volume of regulatory reform in 2021.
British authorities had stated that they would roll out their bank capital rules in the same period with the EU. However, it was not clear when investment capital rules would be introduced.
Investment firms main beneficiaries
According to experts, the dealy will mainly benefit investment firms. However, it will delay what has been termed as a shift to a simpler capital regime for British companies that EU rivals will benefit from six months earlier.
Ash Saluja, a financial services lawyer at CMS, notes that:
“This is a significant example of post-Brexit divergence between the UK and EU regulatory regimes.”
According to the Basel Committee, implementing the last phase of its capital rule can be delayed in early 2023. The committee is a global body of banking supervisors that comprises the Bank of England.