At its meeting on 12 March 2018, the Financial Policy Committee (FPC):
- Set the UK countercyclical capital buffer (CCyB) rate at 1%, unchanged from November. The FPC will reconsider the adequacy of the 1% CCyB rate in June with a particular focus on the evolution of domestic risk appetite.
- Reviewed progress on the checklist that it published in November, of actions that would mitigate risks of disruption associated with Brexit to important financial services used by households and businesses. It judged that since November, in the United Kingdom, progress had been made. Nonetheless, material risks remained, particularly in areas where actions would be needed by both the UK and EU authorities. The FPC re-emphasised the importance that preparations continue to be made and actions taken by relevant authorities to tackle these risks.
- Reviewed the financial stability risks from crypto-assets. It recognised the potential benefits of the technologies underlying crypto-assets and of their potential to create a more distributed and diverse payments system. It judged that existing crypto-assets did not currently pose a material risk to UK financial stability. The FPC made clear that it would act to ensure the core of the UK financial system remained resilient if linkages between crypto-assets and systemically important financial institutions or markets were to grow significantly.
- Agreed to the 2018 stress test scenario being the same as that used in 2017, which would allow the Bank to isolate, as far as possible, the impact on the stress test results of the new accounting standard which came into effect on 1 January 2018 (International Financial Reporting Standard 9, or IFRS 9). This recognised the deployment of resources both within the Bank and at private institutions in 2018 to prepare for Brexit and the introduction of ring-fencing requirements on 1 January 2019. In the FPC’s view, the calibration of the stress scenario remained appropriate given the current risk environment. In 2019 the stress test scenario would be updated in line with the Bank’s usual approach.
- Agreed to the hurdle rates for the 2018 stress test evolving from those used in earlier years. The Bank would hold banks of greater systemic importance to higher standards: each participating bank would now be assessed against single risk-weighted capital and leverage hurdle rates that incorporated any buffers to reflect their systemic importance. These would now include, for the first time, capital buffers for domestic, as well as global, systemic importance. In addition, adjustments would be made to hurdle rates to reflect the increased loss absorbency that would result from higher provisions in stress under the new IFRS 9 accounting standard.