Leverage Ratio – Capital Requirements and Buffers

1.1

Unless otherwise stated, this Part applies to:

1. (1) every CRR firm that:
1. (a1) on the firm’s last accounting reference date, had retail deposits equal to or greater than £50 billion on an individual basis; or
2. (a2) that has foreign assets equal to or greater £10 billion, as determined in accordance with 1.1A, on an individual basis;
3. (a) [deleted]
4. (b) [deleted]
5. (c) [deleted]
2. (1A) every CRR consolidation entity that:
1. (a) on the CRR consolidation entity’s last accounting reference date, had retail deposits equal to or greater than £50 billion;
2. (b) has foreign assets equal to or greater than £10 billion, as determined in accordance with 1.1A,
3. in each case, on the basis of its consolidated situation; and
4. (2) a ring-fenced body that is required to comply with Parts Two and Three of the CRR on a sub-consolidated basis and that:
1. (a) on its last accounting reference date, had retail deposits equal to or greater than £50 billion; or
2. (b) has foreign assets equal to or greater than £10 billion, as determined in accordance with 1.1A,
5. in each case, on an RFB sub-consolidated basis.

1.1A

The foreign assets thresholds referred to in 1.1 above are determined on the basis of the arithmetic mean of the value of foreign assets held as at the three most recent accounting reference dates of the firm or CRR consolidation entity (as applicable). If the firm or CRR consolidation entity has been in existence for less than three years, the period for the calculation is the period during which the firm or CRR consolidation entity has existed.

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.

foreign assets

means assets for which the counterparty is resident in a country or territory outside the UK that a firm is required to report on row 0050 of Annex X Template LV 44.00 of Chapter 6 of the Reporting (CRR) Part.

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 in scope of this Part by virtue of 1.1(1) must comply with this Part on an individual basis, unless it is:

1. (a) a CRR consolidation entity subject to 2.2; or
2. (b) a ring-fenced body subject to 2.4 which is the ultimate parent undertaking within its sub-consolidation group.

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.

2.1B

A firm may apply to the PRA for a permission that:

1. (a) disapplies 2.1; and
2. (b) provides for the requirements in this Part to apply on a sub-consolidated basis in relation to the firm, with such modifications as may be specified in that permission.

[Note: This is a permission under section 144G of FSMA to which Part 8 of the Capital Requirements Regulations applies]

2.2

A CRR consolidation entity which is in scope of this Part by virtue of 1.1(1A) 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 in scope of this Part by virtue of 1.1(2), must comply with this Part on the same sub-consolidated basis as it is required to comply with Parts Two and Three of the CRR.

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).