First published on 7 December 2015
This Supervisory Statement (SS) applies to Capital Requirements Regulation (CRR) firms (hereafter ‘firms’) and CRR consolidation entities on an individual, consolidated, and where relevant, sub-consolidated basis. The purpose of this SS is to give guidance on the UK leverage ratio capital requirements and buffers for firms in scope of the leverage ratio capital requirement, and to set out the Prudential Regulatory Authority’s (PRA) expectation as to how other firms will manage their risk of excessive leverage. It also provides guidance on the methodology for additional reporting and disclosure of an averaged leverage ratio for firms in scope of the leverage ratio capital requirement. It should be read alongside the Leverage Ratio – Capital Requirements and Buffers, Leverage Ratio (CRR), Disclosure (CRR), Reporting (CRR) and Internal Capital Adequacy Assessment Parts of the PRA rulebook. This statement complements the PRA’s rules in implementing the Financial Policy Committee’s Direction and Recommendation with regard to a UK leverage ratio framework.
As stated in the updated SS, firms that are the parents of global systemically important institutions (G-SIIs) and firms subject to an ‘other systemically important institutions’ (O-SII) buffer to which the UK leverage ratio framework applies will be invited to apply for a voluntary requirement (VREQ) under section 55M of the Financial Services and Market Act (2000). Holding companies that are the parents of G-SII groups to which the UK leverage ratio framework applies will be set a consolidated (G-SII) ALRB via a PRA direction under section 192C of the Financial Services and Market Act (2000). For more information please see the Additional Leverage Ratio Buffers Model Requirements.
As stated in the updated SS, firms that are subject to the leverage ratio capital requirement on an individual basis and have subsidiaries that can be consolidated may apply to the PRA for a permission under section 144G of FSMA that replaces that individual requirement with a sub-consolidated requirement. When applying, firms will have to demonstrate that they meet the condition for sub-consolidation set out in SS45/15. The PRA will consider on a case-by case basis whether to grant the application. The application form is available at Permissions (CRR firms). Applications should be sent to PRA-waivers@bankofengland.co.uk copying in the relevant supervisory area. This application is not subject to a fee.