On 11 April 2025, the Prudential Regulation Authority (PRA) announced that it was offering a modification by consent (MbC) to modify Article 11 (1)(d)(ii) of the Liquidity Coverage Ratio part of the PRA Rulebook.

The MbC allows a firm that has incorrectly applied a rule regarding third country covered bonds’ inclusion in Level 2A High Quality Liquid Assets (HQLA) of the Liquidity Coverage Ratio (LCR), to recognise these bonds on a limited and declining basis. The MbC permits inclusion of only the bonds that the firms are including within HQLA 2A up to a maximum value, determined as at 31 January 2025 (the reporting date). As the third country covered bonds mature or are disposed of, they must not be replaced in the LCR, so the cap declines, eventually to zero.

Next steps

Firms and UK Capital Requirements Regulation (CRR) consolidation entities may provide consents to the PRA by emailing PRA-waivers@bankofengland.co.uk.

Following receipt of the relevant consent the PRA will confirm in writing whether it has given a modification direction. If the PRA gives a direction, it will send the direction to the relevant firm or CRR consolidation entity and will publish it on the Financial Services Register. A modification direction takes effect on the date stated in the direction.