Published on 29 July 2016
The PRA’s implementation of the systemic risk buffer – CP27/16
In this consultation paper (CP) the Prudential Regulation Authority (PRA) proposes a draft statement of policy (SoP) setting out the PRA’s approach to the implementation of the systemic risk buffer (SRB).
The CP is relevant to ring-fenced bodies within the meaning of section 142A of the Financial Services and Markets Act 2000 (FSMA) and large building societies that hold more than £25 billion in deposits (where one or more of the accountholders is a small business) and shares (excluding deferred shares) – jointly ‘SRB institutions’.
The policy contained in this CP has been designed in the context of the current UK and EU regulatory framework. The PRA will keep the policy under review to assess whether any changes would be required due to changes in the UK regulatory framework, including those arising once any new arrangements with the European Union take effect.
Summary of proposals
The four policy proposals included in this CP are:
(i) the PRA expects that it will, in the exercise of sound supervisory judgement, deviate from the SRB rates derived from the FPC framework only in exceptional cases;
(ii) for building societies in scope of the framework, the applicable basis of the framework will be the group consolidated basis for building societies that are the parents of consolidation groups and the individual basis for all others;1
(iii) the initial SRB rates will be set and announced by the PRA in early 2019 and will apply three months after being set; and
(iv) following the application of the initial SRB rates, rates will be set and announced annually and will apply the second year following the calendar year of the year they were set.
1The applicable basis of the framework for ring-fenced bodies is outlined in PS20/16 and not in scope of this consultation.
This consultation closed on Friday 28 October 2016.