Large exposures: Reciprocation of French measure

Consultation Paper 15/19
Published on 16 July 2019


In this consultation paper (CP), the Prudential Regulation Authority (PRA) sets out its proposal to apply a tighter limit for large exposures (LE) to certain French non-financial corporations (NFCs), to reciprocate the same measure imposed by France. The proposal would be effected through amendments to the Large Exposures Part of the PRA Rulebook (see Appendix 1).

The proposed measure applies on a consolidated basis to firms identified by the PRA as global systemically important institutions (G-SIIs) and other systemically important institutions (O-SIIs), under the Capital Requirements Directive (2013/36/EU) (CRD) as implemented in the Capital Requirements (Capital Buffers and Macro-prudential measures) Regulations 2014. This CP is therefore relevant to such firms and their subsidiaries. 


The European Systemic Risk Board (ESRB) has recommended European Economic Area (EEA)-wide reciprocation of a macroprudential measure imposed by the Haut Conseil de stabilité financière (HCSF) in France in July 2018 under CRR Article 458 (‘the HCSF measure’).

The HCSF measure lowers the LE limit for French G-SIIs and French O-SIIs in respect of their exposures to French NFCs that are ‘highly indebted’. ‘Highly-indebted’ is defined as having both a leverage ratio greater than 100%, and a ratio of earnings before interest and taxation to interest payment of below three, calculated at the highest level of group consolidation.  

The new limit for these exposures is 5% of the institution’s eligible capital. This compares to the general LE limit, specified under Article 395(1) of the Capital Requirements Regulation (575/2013/EU) (CRR), of 25% of an institution’s eligible capital.

HM Treasury have decided to reciprocate this measure under Article 458(5) of the CRR, and have asked the PRA to implement a measure in the UK consistent with that decision. 

The Financial Policy Committee (FPC) considered the ESRB Recommendation to reciprocate the measure in July 2019. It noted in its Record of that meeting that “Reciprocation would be in line with the FPC’s previously stated intention of reciprocating foreign non-CCyB macroprudential capital actions where appropriate, recognising both the likely benefits to UK financial stability and to maintain consistency with its approach to reciprocating foreign CCyB rates” and that “while currently no UK banks met the materiality threshold set out by the ESRB, banks could do so in the future due to ordinary fluctuations of business. Reciprocation would ensure compliance with the ESRB regime. The FPC noted the measure, through targeting corporate indebtedness, was related to leveraged lending. The FPC had previously identified the rapid growth of leveraged lending globally as a risk to UK financial stability.”

The proposal in this CP is intended to ensure the UK’s compliance with the ESRB Recommendation and to comply with the request from HM Treasury.


The planned implementation date for the proposal in this CP is 1 January 2020.

Responses and next steps

This consultation closes on Friday 6 September 2019. The PRA invites feedback on the proposal set out in this consultation. Please address any comments or enquiries to

The proposal set out in this CP have been designed in the context of the current UK and EU regulatory framework. The PRA has assessed that the proposal will be affected in the event that the UK leaves the EU with no implementation period in place.

A second version of the proposed amendments to the PRA Rulebook rules, which includes the relevant changes relating to the UK’s withdrawal from the EU, is set out in Appendix 2. 

PDFConsultation Paper 15/19

Was this page useful?
Add your details...