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November 14, 2018

PRA published the Policy Statement PS28/18, which provides feedback to responses to the consultation paper CP14/18 titled "UK leverage ratio: Applying the framework to systemic ring-fenced bodies and reflecting the systemic risk buffer." This recently published update also results in changes to the reporting template FSA083 for the UK leverage ratio. PS28/18 is relevant to the firms in scope of the UK leverage ratio framework that are also systemic risk buffer (SRB) institutions, or part of a group containing an SRB institution. The changes to the rules and expectations, along with the new versions of the FSA083 template and accompanying instructions, will take effect from January 01, 2019.

PRA received one response to the consultation paper, which requested clarification on the scope and timing of the proposals. PRA’s feedback to this response is set out in Chapter 2 of PS28/18. PRA has made no changes to the proposals in CP14/18. In CP14/18, PRA proposed to apply the UK leverage ratio framework on a sub-consolidated basis to ring-fenced bodies in scope; amend the additional leverage ratio buffer (ALRB) to reflect the systemic risk buffer; and, where applicable, expect firms to hold capital on a group consolidated basis to address the ring-fenced bodies group risk (the Leverage Ratio Group Add-On). PS28/18 contains the final policy of PRA to update:

  • The Leverage Ratio, Public Disclosure, Reporting Leverage Ratio, and Ring-fenced Bodies Parts of the PRA Rulebook (Appendix 1)
  • SS45/15 on the UK leverage ratio framework (Appendix 2)
  • SS46/15, which contains instructions for completing data items FSA083 with respect to the UK leverage ratio (Appendix 3)
  • The Leverage Ratio Reporting template FSA083 and the associated reporting instructions (Appendix 4).

PRA also published the "Additional Leverage Ratio Buffer Model Requirements," which replaces the previous "Additional Leverage Ratio Buffer Model Requirements for G-SIIs" from January 01, 2019. As stated in the updated SS45/15, global systemically important institutions (G-SIIs) and firms subject to a systemic risk buffer, to which the UK leverage ratio framework applies, will be invited to apply for a voluntary requirement (VREQ) under section 55M of the Financial Services and Market Act (2000). The VREQ would include an Additional Leverage Ratio Buffer (ALRB) based on either the G-SII buffer or systemic risk buffer, as applicable, and the associated reporting and disclosure requirements. If a firm does not hold, or is not likely to hold, an amount and quality of common equity tier 1 (CET1) capital that is equal to or greater than the ALRB, the firm to which the VREQ applies will be required to notify PRA immediately and prepare a capital plan and submit it to PRA. PRA will soon be sending VREQ application forms to UK G-SIIs and UK institutions subject to a systemic risk buffer, which these firms are expected to sign and return. These firms should read their application form in conjunction with the requirements set out in the PRA policy document titled "Additional Leverage Ratio Buffers Model Requirements."

 

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Effective Date: January 01, 2019

Keywords: Europe, UK, Banking, Basel III, Reporting, Leverage Ratio, FSA083, Systemic Risk Buffer, Systemic Risk, Ring Fencing, PS28/18, PRA

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