PRA Proposes to Apply Leverage Ratio Framework to Systemic RFBs
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.
Related Links
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
Featured Experts
Dr. Samuel W. Malone
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.
Previous Article
EBA Single Rulebook Q&A: Second Update for April 2018Related Articles
FED Revises Capital Planning and Stress Testing Requirements for Banks
FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.
ECB Releases Results of Bank Lending Survey for Fourth Quarter of 2020
ECB published results of the quarterly lending survey conducted on 143 banks in the euro area.
ESAs Publish Reporting Templates for Financial Conglomerates
ESAs published the final draft implementing technical standards on reporting of intra-group transactions and risk concentration of financial conglomerates subject to the supplementary supervision in EU.
EBA Publishes Report on Asset Encumbrance of Banks in EU
EBA published the annual report on asset encumbrance of banks in EU.
MAS Revises Guidelines on Technology Risk Management
MAS revised the guidelines that address technology and cyber risks of financial institutions, in an environment of growing use of cloud technologies, application programming interfaces, and rapid software development.
US Agencies Publish Updates for Call Reports, FFIEC 101, and FR Y-9C
FED updated the reporting form and instructions for the FR Y-9C report on consolidated financial statements for holding companies.
EBA Proposes Guidelines for Establishing Intermediate Parent Entities
EBA issued a consultation paper on the guidelines on monitoring of the threshold and other procedural aspects of the establishment of intermediate EU parent undertakings, or IPUs, as laid down in the Capital Requirements Directive.
EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates.
BIS Bulletin Examines Key Elements of Policy Response to Cyber Risk
BIS published a bulletin, or a note, that examines the cyber threat landscape in the context of the pandemic and discusses policies to reduce risks to financial stability.
HMT Updates List of Post-Brexit Equivalence Decisions in UK
HM Treasury, also known as HMT, has updated the table containing the list of the equivalence decisions that came into effect in UK at the end of the transition period of its withdrawal from EU.
