Prudential regulation of credit institutions and investment firms Investment Firms Prudential Regime
The current prudential requirements applicable to credit institutions and investment firms in the UK are largely contained in the EU CRR, which applies directly, EU CRD IV, which was transposed through UK regulators’ rules, the Capital Requirements Regulations 2013 (S.I. 2013/3115), the Capital Requirements (Country-by-Country Reporting) Regulations 2013 (S.I. 2013/3118) and the Capital Requirements (Capital Buffers and Macro-Prudential Measures) Regulations 2014 (S.I. 2014/894). They are also contained in delegated acts and implementing and technical standards that have direct effect in the UK.
	The EU CRR and EU CRD IV were a major EU legislative package that intended to address issues arising from the global financial crisis of 2008/9 following publication of the Basel III standards. Investment firms are subject to CRR and CRD IV, with several exceptions to account somewhat for the specific nature and activities of investment firms. The EU CRR provides much of the detail setting out how prudential requirements should be defined and calculated. In addition to implementing parts of the Basel III standards, CRD IV also introduced EU-specific requirements, including on remuneration and bonuses.
	The Capital Requirements (Amendment) (EU Exit) Regulations (S.I. 2018/1401) ("the Capital Requirements Regulations 2018") amend the CRR, which forms part of retained EU law by virtue of section 3 of the EUWA and therefore continues to apply in the UK following the end of the Transition Period.
	The Capital Requirements Regulations 2018 also amend two pieces of delegated legislation made under the CRR: Commission Delegated Regulation (EU) 2015/61 regarding liquidity coverage requirements for Credit Institutions; and Commission Delegated Regulation (EU) 1222/2014 with regard to the methodology for the identification of global systemically important institutions (G-SIIs).
	The Capital Requirement Regulations 2018 also make amendments to the following pieces of domestic legislation:
the Regulated Covered Bonds Regulations 2008 (S.I. 2008/346);
the Capital Requirements Regulations 2013 (S.I. 2013/3115);
the Capital Requirements (Country-by-Country-Reporting) Regulations 2013 (S.I. 2013/3118); and
Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 (S.I. 2014/894).
	Those amendments are made to address deficiencies of the retained EU law to operate effectively and other deficiencies arising from the UK’s departure from the EU. The Capital Requirements Regulations 2018 were revised in September 2019 by the Capital Requirements (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/1232). This reflected applicable amendments to the CRR made by CRR II in 2019 and, to a lesser extent, by Regulation (EU) 2019/630 of the European Parliament and of the Council of 17 April 2019 amending Regulation (EU) No 575/2013 as regards minimum loss coverage for non-performing exposures.
	More recently, the EU has updated the CRR package through Regulation (EU) 2020/873 of the European Parliament and of the Council of 24 June 2020 amending Regulations (EU) No 575/2013 and (EU) 2019/876 as regards certain adjustments in response to the COVID-19 pandemic, which provides a number of specific prudential amendments to support banks and lending to the real economy through the Covid-19 pandemic. This was directly applicable in the UK. Some further parts of EU CRR II applied as of 28th December 2020, and these parts therefore form part of retained EU law, since they were in effect before the end of the Transition Period. Deficiencies in this retained EU law arising as a result of EU withdrawal have been fixed via the Securities Financing Transactions, Securitisation and Miscellaneous Amendments (EU Exit) Regulations 2020 (S.I. 2020/1385). A number of EU CRR II provisions will apply in the EU from June 2021. As this is after the end of the Transition Period, these elements do not form part of retained EU law and will not apply in the UK.