PRA Updates Final Policy and Reporting Form for Leverage Ratio in UK

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."

Related Links 

• Policy Statement 28/18
• Supervisory Statement 45/15
• Supervisory Statement 46/15
• Additional Leverage Ratio Buffers Model Requirements (PDF)

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