The PRA has published a Policy Statement and a Supervisory Statement concerning capital buffers under the CRD IV Directive (the CRD IV).
The Supervisory Statement (Supervisory Statement 6/14: Implementing CRD IV: capital buffers) sets out the PRA’s expectations on CRD IV capital buffers and provides some clarifications on the PRA’s rules. The statement complements the requirements set out in Title VII chapter 4 of the CRD IV and the capital buffers rules of the PRA Rulebook and the high-level expectations on capital outlined in the PRA’s approach to banking supervision document.
The Policy Statement (Policy Statement 3/14: Implementing CRD IV: capital buffers) sets out the feedback to the responses to Consultation Paper 5/13: Strengthening capital standards: implementing the CRD IV. Appendix 1 of the Policy Statement contains the PRA’s final rules which implement the capital buffers requirements of the CRD IV. Appendix II contains the Supervisory Statement.
In the Policy Statement, the PRA sets out the authorities that HM Treasury has designated to set certain CRD IV buffers and buffer rates in the UK. These include:
- from 1 May 2014, the Bank of England is the designated authority for the countercyclical capital buffer with policy decisions delegated to the Financial Policy Committee;
- the PRA will be responsible for identifying global systemically important institutions (G-SIIs) and setting the G-SII buffer. The European Banking Authority will submit draft regulatory technical standards to the European Commission on the methodology by which the PRA will identify G-SIIs and allocate them to a subcategory by 30 June 2014. The first G-SII buffer, which will apply to those firms identified as G-SIIs based on end-2013 data, will be phased in, in equal steps over a three year period, starting in 2016 and taking full effect on 1 January 2019; and
- the PRA will be responsible for identifying other systemically important institutions (O-SIIs) from 1 January 2016. The PRA intends to consult on and set out its policy for identifying O-SIIs in 2015.
HM Treasury has not yet designated an authority to be responsible for the systemic risk buffer.
View PRA webpage – Implementing CRD IV: capital buffers, 30 April 2014