UK consolidates bank-capital equivalence into single overseas regime

CRR firms and CRR consolidation entities calculating risk weights and own funds use Treasury designations under a single Overseas Prudential Requirements Regime instead of the fragmented UK Capital Requirements Regulation equivalence provisionsLegislation. The instrument restates those provisions as one regime, preserves the overall scope and effect of the existing regimesLegislation, and treats existing equivalence decisions as designations under regulation 3, with the lists set out in the Schedule. Further designations require a subsequent statutory instrumentLegislation. The prudential effect of a designation applies through the Prudential Regulation Authority's rules on risk weights.

The Treasury may by regulations designate an overseas jurisdiction in relation to regulation 4, 5, 6(1), (3) or (4), or 7Legislation. It may do so only if it considers those regulations compatible with protecting the stability of the financial system of the United Kingdom and the safety and soundness of CRR firmsLegislation. They must also be compatible with one or both of promoting effective competition in the interests of consumers and facilitating the international competitiveness of the economy of the United Kingdom and its growth in the medium to long termLegislation. When considering designation, the Treasury may have regard to any matter they consider relevant, including the overseas jurisdiction's law and practice on authorisation, prudential regulation, supervision and enforcement, bond regulation and confidential-information handling. They may also have regard to alignment with relevant international standards and whether the PRA and the FCA have effective cooperation arrangements with the overseas competent authorities.

A designated overseas credit institution, investment firm or exchange exposure may be treated as an exposure to an institution for articles 119 to 121 of the Credit Risk: Standardised Approach (CRR) Part of the PRA RulebookLegislation. An exchange qualifies only where the overseas jurisdiction's banking regulator treats the exposure in the same manner as an exposure to a credit institution; otherwise the PRA sets the requirement, typically as a corporate exposureLegislation. A designation must state which of the three categories it covers and may limit exposure types or attach conditions. An overseas eligible covered bond — issued by an authorised credit institution with its registered office in the designated jurisdiction — may be treated as an eligible covered bond for article 129, subject to any specified conditionsLegislation; no preferential treatment arises until a future designationLegislation.

For sovereign and quasi-sovereign exposures, a firm may assign the overseas competent authority's risk weight to a central-government or central-bank exposure denominated and funded in that jurisdiction's currency for article 114Legislation. A regional-government or local-authority exposure may be treated in the same manner as the central government for article 114 or 115 where regulations are in force and the overseas competent authority treats it the same wayLegislation. It must also pose no higher risk than the central government because the body has adequate powers to raise revenue and institutional arrangements are in place to reduce default risk. A public-sector-entity exposure takes the corresponding article 116 weight the overseas authority assigns. Capital instruments of an overseas intermediate financial holding company that is a subsidiary undertaking of the firm, incorporated in the designated jurisdiction and subject to at least as stringent prudential requirements, are treated as subsidiary capital under articles 81 and 82 of the Own Funds (CRR) PartLegislation. Gibraltar exposures keep direct favourable treatment, including Gibraltar government exposures weighted as the United Kingdom GovernmentLegislation.

Legal basis is the Overseas Prudential Requirements Regime (Credit Institutions and Investment Firms) Regulations 2026 (SI 2026/1116)Legislation, made on 21 October 2026Legislation, extending to England and Wales, Scotland and Northern Ireland, with regulation 3 added to the Financial Services (Overseas Recognition Regime Designations) Regulations 2025.