The Bank of England has published a record of the Financial Policy Committee’s (FPC) meeting on 13 May 2016.
The systemic risk buffer (SRB) augments the capital buffer of a ring-fenced bank or large building society, enabling them to absorb greater losses before breaching their minimum capital requirements. Under the UK legislation implementing the SRB (the Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015) the FPC is required to specify a framework to guide the setting of the SRB. On 29 January 2016, the FPC published a consultation paper setting out its proposed framework for the SRB. Once the framework has been agreed by the FPC, it will be applied by the PRA from 1 January 2019 to all ring-fenced banks and to large building societies that hold more than £25 billion in deposits and shares (excluding deferred shares).
At its meeting on 13 May the FPC reviewed the responses to its January 2016 consultation paper. Having reflected on those responses, the FPC decided to adopt as final a framework that was broadly the same as that on which it had consulted. The only addition was the FPC agreed to supplement the SRB framework with the following recommendation to the PRA:
- The FPC recommends to the PRA that it should seek to ensure that, where systemic buffers apply at different levels of consolidation, there is sufficient capital within the consolidated group, and distributed appropriately across it, to address both global systemic risks and domestic systemic risks.
The aim of the recommendation is to ensure that sufficient capital was held within, and distributed appropriately across, consolidated groups to address both global and domestic systemic risks, which was an issue that had been highlighted in a number of consultation responses.
View Financial Policy Committee meeting 13 May 2016, 26 May 2016