The PRA has published Policy Statement 21/17: UK leverage ratio: treatment of claims on central banks (PS21/17). PS21/17 is relevant to PRA-regulated banks and building societies with retail deposits equal to or greater than £50 billion on an individual or a consolidated basis.

In PS21/17 the PRA provides feedback to the responses to Consultation Paper 11/17: Consultations by the Financial Policy Committee and PRA on changes to the UK leverage ratio framework relating to the treatment of claims on central banks (CP11/17).

In response to the Financial Policy Committee’s recommendation of 20 September 2017, and in line with CP11/17, the PRA is amending the PRA Rulebook and Supervisory Statement 46/15: UK leverage ratio: instructions for completing data items FSA083 and FSA084 to:

  • Align them with its July 2016 modification by consent to exclude central bank claims matched by deposits in the same currency and of identical or longer maturity from the definition of the total leverage exposure measure in the UK leverage ratio framework;
  • Increase the minimum leverage ratio requirement from 3% to 3.25% of total exposures; and
  • Align the UK leverage ratio reporting and disclosure requirements to the proposed definition of the total exposure measure and 3.25% minimum leverage ratio requirement.

There were no significant concerns raised during the consultation and therefore no changes have been made to the proposals. However, the PRA provides some further clarifications in chapter 2 of PS21/17.

The reporting changes come into effect immediately, so will apply to firms’ reporting and disclosure requirements for end-December 2017 onwards.

The revised definition of the total exposure measure will flow through to firms’ obligations with regard to the leverage ratio reporting and disclosure requirements.

Firms will have to report to the PRA, but not disclose publicly, the total amount of central bank claims being excluded from the total exposure measure, including a specification of the amount of Bank of England claims in sterling that are being excluded.

For leveraging reporting and disclosure obligations under the Capital Requirements Regulation (CRR), CRR firms are required to use the total exposure measure definition set out in Article 429(4) of the CRR.

View UK leverage ratio treatment of claims on central banks – PS21/17, 3 October 2017