FPC Proposes Changes to O-SII Buffer Framework for Banks
The Financial Policy Committee (FPC) of the Bank of England (BoE) proposed changes to the framework for the other systemically important institution (O-SII) buffer. In response to the review with respect to the third quarter of 2021, FPC is consulting to amend its framework to change the metric used to determine O-SII buffer rates from total assets to the UK leverage exposure measure. FPC is also proposing to recalibrate the thresholds used to determine O-SII buffer rates to prevent an overall tightening or loosening of the framework relative to its pre-COVID level. The consultation period ends on February 15, 2022.
The proposal aims to ensure that the framework still addresses the key systemic risk intended by FPC: the risk that a distressed ring-fenced bank or large building society disrupts the supply of credit to the real economy. It achieves this in the following ways:
- First, it excludes from the framework central bank reserves, which grew significantly during the pandemic but do not reflect a bank’s potential to disrupt the credit supply. This exclusion mitigates the risk that future changes in central bank balance sheets inadvertently affect banks’ lending decisions by interacting with the O-SII buffer. It also allows banks to draw on central bank liquidity as necessary, without becoming constrained by the associated effect on buffer requirements.
- Second, the proposal brings into the framework committed but undrawn credit facilities. Experience during the pandemic suggests that these can form an important part of the credit supply in stress.
If the proposal is adopted, the changes would come into effect in time for the Prudential Regulation Authority (PRA) to assess rates under a revised framework in December 2023, based on end-2022 financial results. Rates set in 2023 would then apply from January 2025. This consultation is relevant to PRA-regulated ring-fenced banks and large building societies that are subject to the O-SII buffer.
Related Link: Consultation
Keywords: Europe, UK, Banking, Ring Fencing, O-SII, Regulatory Capital, FPC, Leverage Ratio, Basel, PRA
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
FED Announces Launch of Climate Scenario Analysis Exercise in 2023Related Articles
EBA Launches Stress Tests for Banks, Issues Other Updates
The European Banking Authority (EBA) launched the 2023 European Union (EU)-wide stress test, published annual reports on minimum requirement for own funds and eligible liabilities (MREL) and high earners with data as of December 2021.
EBA Proposes Standards for IRRBB Reporting Under Basel Framework
The European Banking Authority (EBA) proposed implementing technical standards on the interest rate risk in the banking book (IRRBB) reporting requirements, with the comment period ending on May 02, 2023.
FED Issues Further Details on Pilot Climate Scenario Analysis Exercise
The U.S. Federal Reserve Board (FED) set out details of the pilot climate scenario analysis exercise to be conducted among the six largest U.S. bank holding companies.
US Agencies Issue Several Regulatory and Reporting Updates
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
ECB Issues Multiple Reports and Regulatory Updates for Banks
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
HKMA Keeps List of D-SIBs Unchanged, Makes Other Announcements
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
EU Issues FAQs on Taxonomy Regulation, Rules Under CRD, FICOD and SFDR
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
CBIRC Revises Measures on Corporate Governance Supervision
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
HKMA Publications Address Sustainability Issues in Financial Sector
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
EBA Updates Address Basel and NPL Requirements for Banks
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.