On 10 September 2024, the Prudential Regulation Authority (PRA) announced that it is reviewing the leverage ratio requirements thresholds and is offering a modification by consent (provided certain conditions are met) to disapply the relevant part of the PRA Rulebook until the review is complete.
The PRA had previously noted in a 2021 policy statement, PS21/21, that it would keep the leverage ratio requirement thresholds under review to ensure they remain consistent with the Bank of England’s concurrent stress testing framework. In 2023, the Financial Policy Committee announced that this framework – including the coverage of banks subject to concurrent stress testing – is being reviewed. The PRA’s review is being carried out in light of this development and the commitment it made in PS21/21.
Until the PRA completes its review, a modification by consent is available to firms to disapply the Leverage Ratio – Capital Requirements and Buffers Part of the PRA Rulebook, if the firm meets both of the following criteria:
- It did not meet the criteria set out in 1.1 of the Leverage Ratio – Capital Requirements and Buffers Part before 10 September 2024.
- It expects to meet the criteria after the next accounting reference date or any accounting reference date before 31 December 2025.
Firms that meet the criteria and want the modification to apply to them are asked to consider the terms of the direction and to email the PRA using the email address provided (and copying their usual supervision contact). The PRA will confirm in writing whether the request has been granted and, if granted, it will publish the approved modification direction in respect of each firm on the Financial Services Register.
The modification by consent will crease to have effect at the end of 30 June 2026, although the PRA may revoke it earlier, at an appropriate time once the review has been completed.