The Financial Policy Committee (FPC) conducted a comprehensive review of the UK leverage ratio framework in light of revised international standards, and its ongoing commitment to review its policy approach. This document outlines the changes that the FPC proposes to make to the framework, and the Prudential Regulation Authority’s (PRA) proposed approach to implementing these changes. The PRA has reviewed the leverage ratio framework concurrently, including to reflect international developments, and has coordinated closely with the FPC in relation to its review. The PRA considers that the FPC’s proposals would advance the PRA’s objectives.
The document below contains two consultation papers (CPs): one from the FPC and one from the PRA.
This consultation is relevant to all Capital Requirements Regulation (CRR) firms and CRR consolidation entities on an individual, consolidated, and where relevant, sub-consolidated basis.
Implementation
Should the FPC make its proposed changes to the UK leverage ratio framework, the PRA proposes that the implementation date for the changes to the definition of Leverage Exposure Measure and reporting and disclosure resulting from this CP would be Saturday 1 January 2022. The changes to scope and level of application of the minimum requirement, buffers, and related additional reporting and disclosure requirements for firms that would be newly brought into scope of the leverage ratio minimum requirement would become effective on Sunday 1 January 2023.
The PRA’s proposals in this consultation are subject to HM Treasury’s proposed revocation of the relevant parts of the CRR, which itself is subject to Parliamentary approval. This is currently anticipated to take effect on Saturday 1 January 2022.
Responses and next steps
This consultation closes on Tuesday 24 August 2021. The FPC and PRA invite feedback on the proposals set out in this consultation.
Comments on the proposed FPC Direction set out in Chapter 3; and on how the PRA would implement the Direction set out in Part 2 may be included in a single response. All responses should be emailed to CP14_21@bankofengland.co.ukby Tuesday 24 August 2021.
The proposals set out in this CP have been designed in the context of the UK having left the European Union and the transition period having come to an end. Unless otherwise stated, any references to EU or EU derived legislation refer to the version of that legislation which forms part of retained EU law.
The consultation papers are available at https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/consultation-paper/2021/june/cp1421.pdf