The Financial Services and Markets Act 2023 (Benchmarks and Capital Requirements) (Amendment) Regulations 2023

On December 19, 2023, the Financial Services and Markets Act 2023 (Benchmarks and Capital Requirements) (Amendment) Regulations 2023 were published on legislation.gov.uk, the official UK website for the publication of legal documents. The regulations make targeted changes to retained EU legislation in relation to the capital requirements of small CRR firms and in relation to the third country benchmarks regime. Specifically, the regulations
(1) modify the retained Capital Requirements Regulation (UK CRR) to reinstate the „discount factor“ that had been unintentionally removed from the CRR. This factor is aimed at reducing the amount of capital that small- and medium-sized firms need to hold for their trading and derivative activities. The goal is to align UK legislation with international standards to maintain competitiveness for UK firms against those based in other jurisdictions. Specifically, the noted factor should thereby be applied to counterparty credit risk exposures determined by institutions to discount or „reduce“ such exposure for small companies for purpose of determining their corresponding own funds requirements.
(2) modify the Retained Benchmark Regulation (UK BMR) to extend the transitional period of the third country benchmarks regime up to December 31, 2030. This transitional period allows third country benchmark users to continue to use such benchmark while corresponding regulatory provisions are still being evaluated on how to proceed with the supervision of third country benchmark providers. Naturally, the extension ensures that firms don’t lose access to non-UK benchmarks crucial to their operations.
The extension also includes a provision allowing the continued use of a legacy third country benchmark beyond the transitional period. Specifically, if a benchmark is already in use within an existing contract, financial instrument, or for measuring investment fund performance by December 31, 2030, it will be permitted to continue being used on and after January 1, 2031.