As per articles 107.3 and 107.4 of CRR, exposures to a third-country credit institution shall be treated as exposures to an institution only where the third country applies prudential and supervisory requirements to that entity that are at least equivalent to those applied in the Union.

The Commission adopted a decision as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union1 which states that for the purposes of article 107.4 of CRR, the third countries and territories listed in annex I to this decision shall be considered as applying equivalent arrangements. United Kingdom is not listed in annex I.

Nevertheless, the UK enacted a number of statutory instruments in an effort to retain or “onshore” certain EU laws and guarantee legal continuity and a smooth transition following the UK’s exit from the EU, and as such, CRR was onshored to form part of the UK’s domestic law (the legislation which imports the retained EU law version of the CRR into UK law is mainly covered by The Capital Requirements EU Exit Regulations).

In the light of above mentioned circumstances, perhaps it was not necessary to assess equivalence of the UK’s prudential supervisory and regulatory requirements (and to list the UK in annex I of decision 2021/1753), as “equivalence” was deemed to be ensured by importing CRR into the UK’s domestic law.

1Commission Implementing Decision (EU) 2021/1753 of 1 October 2021 on the equivalence of the supervisory and regulatory requirements of certain third countries and territories for the purposes of the treatment of exposures in accordance with Regulation (EU) No 575/2013 of the European Parliament and of the Council