BoE has published a policy statement on the Financial Policy Committee’s (FPC) approach to setting the countercyclical capital buffer (CCyB). FPC’s strategy in this policy statement is based around five core principles, being roughly:

  • ensuring the banking system’s resilience to stresses;
  • varying the buffer in line with system risks that banks will incur losses on UK exposures;
  • not usually setting the CCyB to restrain credit growth or mitigate the build-up of risks to banks;
  • expecting to set the CCyB around 1% before when risks are judged to be neither subdued nor elevated; and
  • being able to vary the CCyB gradually and reduce its economic cost.

The CCyB for the UK, set by FPC, will rise from 0% to 0.5% of risk-weighted assets from 29 March 2017. This means a regulated investment firm that is subject to the fourth Capital Requirements Directive (CRD4) must calculate a combined buffer from January 2016. FCA has set out its proposed approach to the interaction between its capital planning buffer and the capital buffers required under CRD4 during the transition period from 1 January 2016 to 1 January 2019. It seeks views on this approach until 29 April. (Source: FPC finalises approach to setting the CCyB and FCA consultation on buffer rate approach)