PRA statement on removing the PRA buffer adjustment in PS15/20

This statement provides an update on the PRA’s approach to the PRA buffer.
Published on 13 June 2022

Overview

In July 2020, in light of the Covid outbreak, and high uncertainty surrounding the extent of the stress, the PRA announced a temporary increase of the PRA buffer for all firms that received a P2A reduction under the PS15/20 ‘Pillar 2A: Reconciling capital requirements and macroprudential buffers’.

The PRA has been setting firm-specific PRA-buffer adjustments in line with the implementation of PS15/20 from 2020, aligning these to 56.25% of the firm-specific total P2A reduction – ie the minimum amount of CET1 the PRA requires for firms to meet P2A requirements.

As uncertainty related to the Covid-19 outbreak has receded, this regulatory measure is no longer necessary and therefore this PRA buffer adjustment will be removed, with effect from end-December 2022. Supervisors will be in contact with firms either through their Supervisory Review and Evaluation Process (SREP) where that is planned in 2022, or separately to communicate firms’ updated PRA buffers. Where the adjustment is immaterial, the change may be aligned with the next SREP to simplify the communications.

Removing a temporary capital adjustment that is no longer necessary aims to achieve simplicity and enhances proportionality, thereby facilitating effective competition.

Scope

This statement is relevant to UK banks, building societies, and PRA-designated investment firms, as well as UK financial holding companies and UK mixed financial holding companies of certain PRA-authorised firms.

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