May 01, 2019

PRA published the systemic risk buffer rates for ring-fenced banks (RFBs) and large building societies. PRA has set systemic risk buffer rates for RFBs in five RFB sub-groups—Lloyds Banking Group RFB sub-group, Royal Bank of Scotland RFB sub-group, Barclays RFB sub-group, HSBC RFB sub-group, and Santander UK RFB sub-group— and these systemic risk buffer rates apply to all exposures, on a sub-consolidated basis. PRA has set a systemic risk buffer rate for the Nationwide Building Society at 1%, which applies to all exposures, on a consolidated basis. The systemic risk buffer rates will be applicable from August 01, 2019

For these RFBs, if the group is not subject to a global systemically important bank (G-SIB) buffer or if the group has a G-SIB buffer rate that is lower than the systemic risk buffer rate, there will be an increase in both the group PRA buffer and the Leverage Ratio Group Add-on. This is to ensure that, where systemic buffers apply at different levels of consolidation, there is sufficient capital within the consolidated group and it is distributed appropriately, to address both global systemic risks and domestic systemic risks. 

From January 01, 2019, PRA is required to set systemic risk buffer rates for RFBs and large building societies (together, systemic risk buffer institutions) by applying the framework of Financial Policy Committee for systemic risk buffer. PRA has set out its approach to the implementation of the systemic risk buffer in its Statement of Policy published in December 2018. PRA has set systemic risk buffer rates by applying the FPC’s framework to the total assets of the systemic risk buffer institutions as of the end of December 2018, assessed on a sub-consolidated basis for RFBs and on a consolidated basis for building societies. In future, PRA expects to publish the systemic risk buffer rates by December 15 of each year, with application by January 01 of the second year following the calendar year when the rates are published.

 

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Keywords: Europe, UK, Banking, Systemic Risk Buffer, Ring Fencing, CRR, CRD, Systemic Risk, PRA

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