On July 10, 2015, the Prudential Regulation Authority published proposed rules on the implementation of the UK leverage ratio framework. The Financial Policy Committee directed the PRA on July 1, 2015, to implement a UK leverage ratio framework applying: (i) a minimum leverage requirement immediately to UK Global Systemically Important Institutions, and from 2018 (subject to a review in 2017) to all banks, building societies and PRA-regulated investment firms; (ii) a supplementary leverage ratio buffer of 35 percent. of corresponding risk weighted systemic buffer rates to UK G SIIs, phased in from 2016, and to domestically systemically important banks, building societies and PRA regulated investment firms from 2019, referred to as the additional leverage ratio buffer or ALRB; and (iii) a countercyclical leverage ratio buffer of 35 percent. of a firm’s institution-specific countercyclical capital buffer rate which will apply immediately to UK G SIIs and other major domestic UK banks and building societies and from 2018 (subject to a review in 2017) to all banks, building societies and PRA regulated investment firms, including any ring fenced banks, large building societies and any other banks that become subject to a countercyclical capital buffer. The PRA proposes that firms covered by the rules should include those with total retail deposits equal to or greater than £50 billion, whether on a consolidated or individual basis, on a firm’s financial year-end date. The PRA is also proposing that relevant firms will be subject to leverage ratio reporting and disclosure requirements. The PRA’s consultation sets out how it intends to implement that framework and includes proposed rules, templates for reporting, a supervisory statement on which firms would be expected to report leverage ratio information and a supervisory statement on the PRA’s expectations on the application of the UK leverage ratio framework.
Responses to the consultation must be submitted by October 12, 2015. The PRA intends to publish its policy statement with feedback, final rules and supervisory statements by the end of 2015. It is proposed that the UK leverage ratio framework will come into force on January 1, 2016.
The PRA’s consultation paper is available at: http://www.bankofengland.co.uk/pra/Documents/publications/cp/2015/cp2415.pdf.