On March 29, 2016, the Financial Policy Committee of the BoE published a Statement from its policy meeting on March 23, 2016. The Statement summarizes the conclusions reached by the FPC. The FPC has decided to increase the UK countercyclical buffer rate from 0% of risk-weighted assets to 0.5% with effect from March 29, 2017. The current overlapping aspects of Pillar 2 supervisory capital buffers will be reduced at the same time as a one-off adjustment. The UK CCyB rate will apply to all UK banks and building societies as well as investment firms not exempted by the Financial Conduct Authority. According to the rules of the European Systemic Risk Board, this buffer will also apply to EU banks lending into the UK either on a cross-border basis or through a local branch. The Prudential Regulation Authority has published a Statement clarifying its approach to adjustments to firms’ buffers as the CCyB, systemic and conservation buffers are implemented up to 2019. The PRA intends to ensure that the supervisory buffers will be reduced as soon as practicable after the CCyB rate comes into effect which will depend on the timing of a firm’s supervisory review and evaluation process. The adjustments aim to ensure that the transition to the new capital framework avoids double counting in capital buffers covering the same risk and give firms time to transition to the requisite capital buffers by the end of 2019.
The FPC will also assess the implementation and design of internationally-agreed post-crisis regulations to determine whether liquidity could be enhanced. The outcome of that assessment is expected later in 2016.
The FPC Statement is available at: http://www.bankofengland.co.uk/publications/Documents/news/2016/032.pdf and the PRA Statement is available at: http://www.bankofengland.co.uk/pra/Documents/publications/reports/prastatement0316.pdf.