PRA is proposing (CP14/18) to apply the systemic risk buffer framework in the UK leverage ratio framework. PRA proposes to apply the UK leverage ratio framework on a sub-consolidated basis to the ring-fenced bodies (RFBs) in scope, to amend the additional leverage ratio buffer (ALRB) to reflect the systemic risk buffer. Where applicable, PRA is expecting firms to hold capital on a group consolidated basis to address the RFB group risk. The consultation closes on September 25, 2018, with the proposed implementation date being January 01, 2019.
To implement the proposed changes, PRA proposes to update the following:
- Parts of the PRA Rulebook—namely leverage ratio, public disclosure, reporting leverage ratio, and ring-fenced bodies framework (Appendix 1)
- The supervisory statement SS45/15 on UK leverage ratio framework (Appendix 2)
- SS46/15 titled "UK leverage ratio: instructions for completing data items FSA083 and FSA084" (Appendix 3)
- FSA083 leverage ratio reporting template (Appendix 4) and instructions (Appendix 5)
CP14/18 is relevant to the firms, in scope of the UK leverage ratio framework, that are also systemic risk buffer institutions or part of a group containing an systemic risk buffer institution. The proposals complement the risk-weighted capital framework by guarding against the risks of relying only on models or standardized approaches to set capital requirements. This promotes the safety and soundness of firms whose distress or failure could cause material harm to the UK economy.
Comment Due Date: September 25, 2018
Effective Date: January 01, 2019
Keywords: Europe, UK, Banking, Systemic Risk, Systemic Risk Buffer, Leverage Ratio, CP14/18, PRA
Sam leads the quantitative research team within the CreditEdge™ research group. In this role, he develops novel risk and forecasting solutions for financial institutions while providing thought leadership on related trends in global financial markets.
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
EBA published guidelines on loan origination and monitoring, which bring together prudential standards and consumer protection obligations, along with the anti-money laundering and the Environmental, Social, and Governance (ESG) considerations.
EBA published a consultation paper on the draft amended regulatory technical standards on own funds and eligible liabilities.
EBA published a report on convergence of supervisory practices in 2019.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.