At its meetings on 22 and 27 November 2017, the Financial Policy Committee (FPC):
- Agreed that the 2017 stress test showed the UK banking system was resilient to deep simultaneous recessions in the UK and global economies, large falls in asset prices and a separate stress of misconduct costs.
- Agreed to raise the UK countercyclical capital buffer (CCyB) rate from 0.5% to 1%, with binding effect from 28 November 2018.
- Agreed to reconsider the adequacy of a 1% UK countercyclical capital buffer rate during the first half of 2018, in light of the evolution of the overall risk environment.
- Assessed the various risks of disruption to UK financial services arising from Brexit and developed a checklist so that preparations could be made and action taken to mitigate them.
- Assessed its stress test scenario against combinations of various risks that might arise from a disorderly Brexit (such as increased tariffs on trade, loss of authorisations to sell products and services, operational disruption to customs and transport infrastructure, and a decline in investor appetite for sterling assets) and concluded that the impacts of these were encompassed within the set of macroeconomic shocks in the stress test.
- Reviewed the Bank’s first ‘exploratory’ stress test exercise, which examined major UK banks’ long-term strategic responses to an extended low growth, low interest rate environment with increasing competitive pressures from financial technology (Fintech). The exploratory scenario had provided a series of insights, ranging from the development of such exercises to the possible future of banking.
- Completed its annual review of risk and regulation beyond the core banking sector, agreed not to recommend any changes to the regulatory perimeter at this stage and asked for an in-depth assessment of the use of leverage in the non-bank financial sector, focusing on leverage created through use of derivatives. It also completed its in-depth assessment of the financial stability risks associated with derivatives transactions and judged that major reforms to global over-the-counter (OTC) derivatives markets after the crisis had improved the resilience of the financial system.
- Agreed that it could consider as implemented the Recommendation that it made to the Prudential Regulation Authority (PRA) in September 2017, on excluding central bank reserves from the calculation of the leverage ratio and requiring a minimum leverage ratio of 3.25%.