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.
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