Capital buffers and Pillar 2A: Modification by Consent and Model Requirements

First published in December 2017

This page is relevant to firms invited to apply for a voluntary requirement (VREQ) under section 55M of the Financial Services and Market Act (2000) in relation to a Pillar 2A requirement, a G-SII buffer or an O-SII buffer.

As part of the VREQ application process, from 1 January 2018 firms are expected to also apply for a modification of 5.1 to 5.3 of the Capital Buffers Part of the PRA Rulebook. The purpose of the modification is to avoid any potential conflict between the individual requirements (of Maximum Distributable Amount trigger points) imposed on a firm and PRA rules.

The modifications below are given by us under section 138A of the Financial Services and Markets Act 2000 (FSMA). The modifications should be read and used in conjunction with the Voluntary Requirement – Capital Buffers and Pillar 2A Model Requirements as outlined below.

The modifications apply where a Pillar 2A requirement, a G-SII buffer or an O-SII buffer has been imposed on the firm on an individual, sub-consolidated or consolidated basis.

Current versions

Published on 1 January 2022. Effective from 1 January 2022.

MBC in conjunction with Voluntary Requirements (PDF)

This modification avoids any potential conflict, between the individual Pillar 2 requirements and buffers imposed on a firm, and PRA rules, and should be read and used in conjunction with the following:

Published on 9 December 2020. Effective from 11.00pm on 31 December 2020.

Voluntary Requirement – Capital Buffers and Pillar 2A Model Requirements (PDF) Opens in a new window

The P2A model requirement allow a firm to make a distribution that would cause its CET1 level to fall within the combined buffer, subject to advance notice to the PRA; and adopt a more flexible definition of MDA, which includes certain profits already recognised as CET1 (removing a disadvantage to firms that recognise profit as CET1 capital more frequently).

Published on 14 October 2021 – MBC in conjunction with PRA Holding Companies

Direction for modification of 5.3 of the Capital Buffers Part of the PRA Rulebook (pdf)

To ensure the capital stack operates as intended, we have made available a Modification to the Capital Buffer rules Parent financial holding companies and parent mixed financial holding companies will be asked to consent to the rule modification by email.

Published November 2021 - Qualifying Parent Undertakings Capital Buffers and Pillar 2A

Model Direction (PDF)

Past versions

Published on 9 December 2020. Effective from 29 December 2020.
- MBC in conjunction with PRA Own Initiative Requirements (pdf)
We published a modification by consent alongside Policy Statement (PS) 29/20 ‘Capital Requirements Directive V (CRD V)’. This modification avoids any potential conflict, between the individual Pillar 2 requirements and buffers imposed on a firm, and PRA rules, after these elements of CRD V are implemented.

Firms are invited to consent to the rule modification by email, and should contact PRA-AuthsCRDVChange@bankofengland.co.uk by 1 February 2021, copying in their usual supervision contact. The email should include the firm(s) name and reference number. The modification contains a list of the firms consenting to the modification. That list is updated with the names of consenting firms at regular intervals.

Published on 21 January 2021. Effective from 1 January 2021.
- MBC in conjunction with Voluntary Requirements (pdf)
- As described in PS26/20 (Capital Requirements Directive V (CRD V)), the PRA has exercised its own initiative powers under s55M(3) and s55Y(4) FSMA to implement the changes to (i) the Capital Buffers and Pillar 2A Model Requirement and (ii) the Additional Leverage Ratio Buffer Model Requirements, as well as, for those firms subject to it, to replace references to the Systemic Risk Buffer with references to the O-SII Buffer. All firms have received Own Initiative Requirement notices from December 2020 to that effect. The text of the current Capital Buffers and Pillar 2A Model Voluntary Requirement (VREQ) and Additional Leverage Ratio Buffer Model Requirements is available on the Bank of England website.
Published on 9 December 2020. Effective from 29 December 2020 until 11.00pm on 31 December 2020.
- Voluntary Requirement – Capital Buffers and Pillar 2A Model Requirements (pdf)
The changes permit firms to distribute interim and year-end profits (net of distributions) that are not included in CET1 capital resources, irrespective of the timing of the last distribution. This increases the maximum amount that firms would be permitted to distribute when they use the combined buffer.

Published in December 2017. Effective from 1 January 2018 and until 28 December 2020.
- Direction for modification by consent of 5.1 to 5.5 of the Capital Buffers Part of the PRA Rulebook (PDF)
This modification by consent should be read and used in conjunction with the Voluntary Requirement – Capital Buffers and Pillar 2A Model Requirements