Skip to main content
  • This website sets cookies on your device. To find out more about how we use cookies please refer to our Privacy and Cookie Policy. By continuing to use the site, we’ll assume that you are content for us to set these on your device.
  • Close
Home > Prudential Regulation Authority > UK Leverage Ratio treatment of claims on central banks – PS21/17
 

UK Leverage Ratio treatment of claims on central banks – PS21/17

03 October 2017

Overview

This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to Consultation Paper (CP) 11/17 ‘ Consultations by the Financial Policy Committee (FPC) and PRA on changes to the UK leverage ratio framework relating to the treatment of claims on central banks’. 

This PS is relevant to PRA-regulated banks and building societies with retail deposits equal to or greater than £50 billion on an individual or a consolidated basis (hereafter ‘firms’).

In response to the FPC’s Recommendation, and in line with CP11/17, the PRA is amending the PRA Rulebook and Supervisory Statement (SS) 46/15 ‘UK leverage ratio: instructions for completing data items FSA083 and FSA084’ to:

(i) align them with its July 2016 modification by consent to exclude central bank claims matched by deposits in the same currency and of identical or longer maturity from the definition of the total leverage exposure measure in the UK leverage ratio framework;
(ii) increase the minimum leverage ratio requirement from 3% to 3.25% of total exposures; and
(iii) align the UK leverage ratio reporting and disclosure requirements to the proposed definition of the total exposure measure and 3.25% minimum leverage ratio requirement.

At its Policy meeting on 20 September 2017, the FPC recommended to the PRA that its rules on the leverage ratio:

(i) exclude from the calculation of the total exposure measure those assets constituting claims on central banks, where they are matched by deposits accepted by the firm that are denominated in the same currency and of identical or longer maturity; and
(ii) require a minimum leverage ratio of 3.25%.

Central bank claims for these purposes include reserves held by a firm at the central bank, banknotes and coins constituting legal currency in the jurisdiction of the central bank, and assets representing debt claims on the central bank with a maturity of no longer than three months.

Feedback on consultation responses

The FPC and PRA consultations received four responses to the CP. Respondents broadly supported the exclusion of claims on central bank reserves in the leverage exposure measure in principle. Some responses raised concerns about aspects of the proposed recalibration of the minimum leverage requirement, and alignment of UK leverage ratio disclosure and reporting requirements. These response have informed the PRA’s final consideration in amending its Rulebook and SS46/15 as proposed in the CP.

Policy statement

UK Leverage Ratio treatment of claims on central banks – PS21/17

Appendices

1. PRA Rulebook: LEVERAGE RATIO AND REPORTING LEVERAGE RATIO (AMENDMENT) INSTRUMENT [2017] 
2. UK leverage ratio: instructions for completing data items FSA083 and FSA084 – SS46/15
3. FSA083 leverage ratio template
4. Instructions of FSA083 leverage ratio template

Share