Leverage Ratio – Capital Requirements and Buffers

1.1

Unless otherwise stated, this Part applies to:

1. (1) every firm that is a UK bank or a building society that, on the firm’s last accounting reference date, had retail deposits equal to or greater than £50 billion on an individual basis;
1. (a) [deleted]
2. (b) [deleted]
3. (c) [deleted]
2. (1A) every CRR consolidation entity that is, or that controls, a UK bank or a building society and that, on the CRR consolidation entity’s last accounting reference date, had retail deposits equal to or greater than £50 billion on the basis of its consolidated situation; and
3. (2) a ring-fenced body that is required to comply with Parts Two and Three of the CRR on a sub-consolidated basis and is a member of a group containing an entity falling within 1.1(1) or 1.1(1A).

1.2

In this Part, the following definitions shall apply:

capital plan

means the plan described in Chapter 6.

deposit

has the meaning given in the Table of Part 2 of Annex II to Regulation (EU) No 1071/2013 of the European Central Bank of 24 September 2013 concerning the balance sheet of the monetary financial institutions sector as it had effect in EU law immediately before IP completion day.

FPC

means the Financial Policy Committee of the Bank of England.

retail deposit

means deposits from “households” as defined in paragraph 42(f) of Part 1 of Annex V to the Reporting (CRR) Part.

1.3

Unless otherwise defined, any italicised expression used in this Part and in the CRR has the same meaning as in the CRR.

2.1

A firm that is not a member of a consolidation group in relation to which 2.2 applies must comply with this Part on an individual basis.

2.1A

Where a firm has been given permission under Article 9(1) of the CRR it shall incorporate relevant subsidiaries in the calculation undertaken to comply with rule 2.1.

2.2

A CRR consolidation entity must comply with this Part on the basis of its consolidated situation.

2.2A

The expression “consolidated situation” applies for the purposes of this Part as it does for the purposes of Parts Two and Three of the CRR.

[Note: the term “consolidation situation” is defined in Article 4(1)(47) of the CRR]

2.2B

For the purposes of 2.2, references to a firm in this Part (other than in 1.1) include a CRR consolidation entity.

2.3

[Deleted]

2.4

A ring-fenced body which is required to comply with Parts Two and Three of the CRR on a sub-consolidated basis, must comply with this Part on the same basis.

3.1

A firm must hold sufficient tier 1 capital (leverage) to maintain, at all times, a minimum leverage ratio of 3.25%.

3.2

For the purposes of complying with 3.1, at least 75% of the firm’s tier 1 capital (leverage) must consist of common equity tier 1 capital.

4.1

A firm must calculate a countercyclical leverage ratio buffer of common equity tier 1 capital equal to:

1. (1) the firm’s institution-specific countercyclical capital buffer rate multiplied by 35% with the product expressed as a percentage rounded to the nearest tenth of a percentage; multiplied by
2. (2) the firm’s total exposure measure.

4.2

A firm must not count common equity tier 1 capital that is maintained for the purposes of 3.1 towards the calculation in 4.1.

5.1

A firm must notify the PRA immediately if, at any time, it does not hold, or is likely not to hold, an amount and quality of capital that is:

1. (1) necessary to comply with 3.1; and
2. (2) equal to or greater than its countercyclical leverage ratio buffer.

6.1

When a firm is required to make a notification to the PRA under rule 5.1(2), it must prepare a capital plan and submit it to the PRA no later than 5 business days after the firm identified that the notification was necessary.

6.2

The capital plan must include the following:

1. (1) measures to secure that the amount of the firm’s common equity tier 1 capital is equal to or greater than the firm’s countercyclical leverage ratio buffer; and
2. (2) a plan and timeframe for the measures outlined for the purposes of rule 6.2(1).