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The Capital Requirements (Amendment) (EU Exit) Regulations 2018

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Version Superseded: 29/08/2023

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CHAPTER 4U.K.Amendment of the 2014 Regulations

Amendments to the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014U.K.

34.  The 2014 Regulations are amended in accordance with this Chapter.

Commencement Information

I1Reg. 34 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 2 (interpretation)U.K.

35.—(1) Regulation 2 (interpretation) is amended as follows.

(2) In paragraph (1)—

[F1(za)for the definition of “appropriate regulator”, substitute—

““appropriate regulator” means—

(a)

the PRA, in relation to PRA-authorised persons and financial holding companies and mixed financial holding companies approved or designated by the PRA under—

(i)

Part 12B of FSMA, or

(ii)

regulation 5 of the Financial Holding Companies (Approval etc.) and Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) (EU Exit) Regulations 2020;

(b)

the FCA in relation to any other person;”]

(a)for the definition of “capital conservation buffer” substitute—

““capital conservation buffer” means—

(a)in relation to a PRA-authorised person, the capital conservation buffer that the person must calculate in accordance with Chapter 2 of the Capital Buffers Part of the PRA rulebook;

[F2(aa)in relation to a parent financial holding company and a parent mixed financial holding company, a capital conservation buffer the holding company is required to calculate under rules made by the PRA under section 192V of FSMA;]

(b)in relation to a person to whom chapter 10 of the FCA's Prudential sourcebook for Investment Firms applies, the capital conservation buffer that the person must calculate in accordance with section 10.2 of the sourcebook;”;

(b)after the definition of “capital conservation buffer” insert—

““the capital requirements regulation” means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, as it forms part of domestic law by virtue of section 3 of the European Union (Withdrawal) Act 2018, and as amended from time to time thereafter;”

(c)for the definition of “combined buffer requirement” substitute—

““combined buffer requirement” means the total Common Equity Tier 1 capital required to meet the requirements for the capital conservation buffer extended by the following, as applicable—

(a)an institution-specific countercyclical capital buffer;

(b)a G-SII buffer;

[F3(ba)an O-SII buffer;]

(c)a systemic risk buffer;”;

(d)for the definition of “G-SII buffer” substitute—

““G-SII buffer” means the own funds that a G-SII is required to maintain in accordance with Part 4 of these Regulations, corresponding to the sub-category to which the G-SII is allocated and consisting of and supplementary to the Common Equity Tier 1 capital;”;

(e)for the definition of “institution-specific countercyclical capital buffer” substitute—

““institution-specific countercyclical capital buffer” means—

(a)in relation to a PRA-authorised person, the countercyclical capital buffer that the person must calculate in accordance with Chapter 3 of the Capital Buffers Part of the PRA rulebook;

[F4(aa)in relation to a parent financial holding company or a parent mixed financial holding company, a countercyclical capital buffer which the holding company is required to calculate under rules made by the PRA under section 192V of FSMA;]

(b)in relation to a person to whom chapter 10 of the FCA's Prudential sourcebook for Investment Firms applies, the countercyclical capital buffer that the person must calculate in accordance with section 10.3 of the sourcebook;”;

[F5(ea)before the definition of “systemic risk buffer”, insert—

““parent financial holding company” and “parent mixed financial holding company” have the meanings given in section 192O(2) of FSMA;”;]

(f)for the definition of “systemic risk buffer” substitute—

““systemic risk buffer” has the meaning set out in regulation [F634C(1)] of these Regulations;”;

(g)omit the following definitions—

““EEA parent financial holding company”;”

““EEA parent institutiony”;”

““EEA parent mixed financial holding company”;”

““ESRB”;”

F7...

[F8(2A) For the definition of “O-SII buffer” substitute—

““O-SII buffer” has the meaning given in regulation 34ZA.”]

(3) After paragraph (2) insert—

“(2A) In these Regulations—

(a)a reference to the PRA rulebook is to the rulebook published by the Prudential Regulation Authority containing rules made by that Authority under FSMA as the rulebook has effect on [F9IP completion day] ;

(b)any reference to a sourcebook is to a sourcebook in the Handbook of Rules and Guidance published by the Financial Conduct Authority containing rules made by that Authority under FSMA as the sourcebook has effect on [F9IP completion day] .”.

(4) Omit paragraph (3).

(5) Omit paragraph (4).

Textual Amendments

Commencement Information

I2Reg. 35(1) in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

I3Reg. 35(2)(a)(b)(d)(e)(ea)(g)(za) in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

I4Reg. 35(2)(c)(f) in force at 29.12.2020, see reg 1(2A)

I5Reg. 35(2A) in force at 29.12.2020, see reg 1(2A)

I6Reg. 35(3)-(5) in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 6 (exemption for small and medium-sized investment firms)U.K.

36.  In regulation 6 (exemption for small and medium-sized investment firms)—

(a)in paragraph (1) for the words “small or medium-sized investment firm, or small or medium-sized investment firms of a specified description,” substitute “ SME ”;

(b)in paragraph (2)(a) for “small or medium-sized investment firms” substitute “ SMEs ”;

(c)omit paragraph (3).

Commencement Information

I7Reg. 36 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Chapter 1, Part 3 (designated authority and interpretation)U.K.

37.  For the heading of Chapter 1, Part 3 (designated authority and interpretation) substitute “ Overview and interpretation ”.

Commencement Information

I8Reg. 37 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 7 (designated authority)U.K.

38.  For regulation 7 (designated authority) substitute—

“Overview

7.—(1) This Part makes provisionF10...—

[F11(a)for how the Bank—]

[F12(i)]must assess and set a countercyclical capital buffer rate for the United Kingdom (which relates to exposures located in the United Kingdom), and;

[F12(ii)]may recognise or set buffer rates for exposures which are located in countries other than the United Kingdom and held by UK institutions.

[F13(b)for how the PRA is to apply institution-specific countercyclical capital buffers to parent financial holding companies and parent mixed financial holding companies.]

(2) The buffer rates mentioned in paragraph (1) must be used in the determination of institution-specific countercyclical capital buffers.”.

Textual Amendments

Commencement Information

I9Reg. 38 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 8 (meaning of “UK institution”)U.K.

39.  In regulation 8 (meaning of “UK institution”), omit the definition of “EEA authority”.

Commencement Information

I10Reg. 39 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 9 (the buffer guide)U.K.

40.  In regulation 9 (the buffer guide), omit paragraph (3)(b) and the “and” preceding it.

Commencement Information

I11Reg. 40 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 10 (countercyclical buffer rate)U.K.

41.  In regulation 10 (countercyclical buffer rate), in paragraph (3), omit sub-paragraphs (b) and (c).

Commencement Information

I12Reg. 41 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 12 (announcement of changes to the buffer rate)U.K.

42.  In regulation 12 (announcement of changes to the buffer rate), omit paragraphs (4) and (5).

Commencement Information

I13Reg. 42 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 12A (insertion of new paragraph)U.K.

43.  After regulation 12 (announcement of changes to the buffer rate) insert—

“Buffer rate rules

12A.—(1) Nothing in paragraph 17(9)(b) of Schedule 6A to the Bank of England Act 1998 or paragraph 8 of Part 1 of Schedule 1ZA to FSMA prohibits the making of a rule by the PRA or the FCA that references a countercyclical capital buffer rate set by the FPC under this Part.”M1.

Commencement Information

I14Reg. 43 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Marginal Citations

M11998 c.11, paragraph 17(9)(b) inserted by paragraph 1 of Schedule 1 of the Bank of England and Financial Services Act 2016 c.14; 2000 c.8, Schedule 1ZA substituted by Schedule 3 of the Financial Services Act 2012 c.21.

Regulation 14 (buffer rates for EEA exposures)U.K.

44.  For regulation 14 (buffer rates for EEA exposures: on or after 1st January 2016) substitute—

“Buffer rates for EEA exposures: savings provision

14.—(1) Where, on or before [F14IP completion day] —

(a)an EEA authority set a buffer rate (“the EEA buffer rate”) for that EEA state for the purpose of enabling institutions in that EEA State to calculate their institution-specific countercyclical capital buffer,

(b)the EEA buffer rate exceeded 2.5%, and

(c)the EEA buffer rate was recognised by the FPC, so that UK institutions with exposures located in that EEA State could be required by the PRA and FCA to apply it in their calculation of their institution-specific countercyclical capital buffers,

the FPC's decision to recognise the EEA buffer rate must be treated after [F14IP completion day] as though it were a decision made under regulation 15 of these Regulations.”.

Textual Amendments

Commencement Information

I15Reg. 44 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 15 (buffer rates for exposures outside the EEA)U.K.

45.  In regulation 15 (buffer rates for exposures outside the EEA)—

(a)in the heading, for “EEA” substitute “ UK ”;

(b)in paragraph (1)(b), for “outside of the EEA” substitute “ other than the United Kingdom ”.

Commencement Information

I16Reg. 45 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 17 (date of application of buffer rates)U.K.

46.  In regulation 17 (date of application of buffer rates), in paragraph (1)(a), for “regulations 13, 14 or 15” substitute “ regulation 15 ”.

Commencement Information

I17Reg. 46 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 18 (announcement of changes to buffer rates)U.K.

47.  In regulation 18 (announcement of changes to buffer rates)—

(a)in paragraph (1), for “regulations 13, 14 or 15” substitute “ regulation 15 ”;

(b)in paragraph (2)(c), omit “EEA State or”.

Commencement Information

I18Reg. 47 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

[F15Regulation 19A (institution-specific countercyclical capital buffer and holding companies)U.K.

47A.—(1) After regulation 19, insert—

“Application of the institution-specific countercyclical capital buffer to holding companies

19A.  Where the PRA makes rules under section 192V of FSMA requiring a parent financial holding company or a parent mixed financial holding company (a “holding company”) to calculate an institution-specific countercyclical capital buffer—

(a)the buffer rate set by the FPC under regulation 10, or recognised or set under regulation 15, is to apply to the holding company as it applies to a UK institution;

(b)the date set by the FPC for the application—

(i)of a change in the buffer rate under regulation 11, or

(ii)of a buffer rate recognised or set under regulation 15,

is to apply to the holding company as it applies to a UK institution.”]

Textual Amendments

Commencement Information

I19Reg. 47A in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 20 (exemption for small and medium-sized investment firms)U.K.

48.  In regulation 20 (exemption for small and medium-sized investment firms)—

(a)in paragraph (1), for “small or medium-sized investment firm, or small or medium-sized investment firms of a specified description,” substitute “ SME ”;

(b)in paragraph (2)(a), for “small and medium-sized investment firms” substitute “ SMEs ”;

(c)omit paragraph (3).

Commencement Information

I20Reg. 48 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 21 (designated authority)U.K.

49.  For regulation 21 (designated authority) substitute—

“Duty of PRA to identify G-SIIs

21.  The PRA must identify G-SIIs in accordance with the provisions of this Part.”.

Commencement Information

I21Reg. 49 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 22 (G-SIIs: location and nature)U.K.

50.  In regulation 22 (G-SIIs: location and nature), for paragraph (2) substitute—

“(2) A G-SII must also be—

[F16(a) a group, the parent undertaking of which is—

(i)a UK parent institution,

(ii)a UK parent financial holding company, or

(iii)a UK parent mixed financial holding company, or

(b)an institution authorised in the United Kingdom which is not a subsidiary of a body mentioned in sub-paragraph (a)(i) to (iii).”].

Textual Amendments

Commencement Information

I22Reg. 50 in force at 29.12.2020, see reg. 1(2A)

Regulation 23 (identification methodology)U.K.

51.  In regulation 23 (identification methodology)—

[F17(za)in paragraph (1)—

(i)for “particular body”, substitute “particular group or body”,

(ii)for “relevant body”, both times it occurs, substitute “relevant institution”;]

(a)for paragraph (2) substitute—

“(2) [F18Where the parent undertaking of the relevant institution] is a UK parent institution, a UK parent financial holding company or a UK parent mixed financial holding company, the identification methodology must be applied in accordance with Commission Delegated Regulation (EU) No 1222/2014 or any technical standards made by the PRA under the functions conferred on it by Article 464B(3) of the capital requirements regulation.”;

[F19(b)in paragraph (3)—

(i)in sub-paragraph (a), for “to which the relevant body belongs” substitute “concerned”,

(ii)in sub-paragraph (e) omit the words from “, including” to the end.]

[F20(c)in paragraph (5), for “relevant body”, each time it occurs, substitute “relevant institution”.]

Textual Amendments

Commencement Information

I23Reg. 51(za)(a)(b)(i)(c) in force at 29.12.2020, see reg. 1(2A)

I24Reg. 51(b)(ii) in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 24 (sub-categories of G-SII and corresponding buffer rates)U.K.

52.  In regulation 24(1) (sub-categories of G-SII and corresponding buffer rates), for the words “any directly applicable regulation” to the end substitute “ Commission Delegated Regulation (EU) 1222/2014 or any technical standards made by the PRA under the functions conferred on it by Article 464B(3) of the capital requirements regulation. ”.

Commencement Information

I25Reg. 52 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

[F21Regulation 25 (re-allocation in exercise of sound supervisory judgment)U.K.

52A.  In regulation 25(a)—

(a)after “determine that”, insert “a group or”;

(b)after “fact that” insert “the group or”.]

Textual Amendments

Commencement Information

I26Reg. 52A in force at 29.12.2020, see reg. 1(2A)

Regulation 26 (notification, publication and review)U.K.

53.  In regulation 26 (notification, publication and review)—

(a)omit paragraphs (1) to (3);

[F22(b)in paragraph (5)—

(i)for the “bodies concerned” substitute “to the UK parent institution, UK parent financial holding company, UK parent mixed financial holding company or institution concerned”,

(ii)omit “, the Commission, the ESRB and EBA”.]

Textual Amendments

Commencement Information

I27Reg. 53(a)(b)(ii) in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

I28Reg. 53(b)(i) in force at 29.12.2020, see reg. 1(2A)

[F23Regulation 27 (Appeals)U.K.

53A.  In regulation 27—

(a)in paragraph (1)—

(i)in sub-paragraph (a), after “the person”, insert “or a group for which the person is UK parent institution, UK parent financial holding company, UK parent mixed financial holding company (a “relevant group”),”,

(ii)in sub-paragraph (b), after “person”, insert “or the relevant group”;

(b)in paragraph (2), at the end, insert “or the relevant group”.]

Textual Amendments

Commencement Information

I29Reg. 53A in force at 29.12.2020, see reg. 1(2A)

Regulation 28 (transitional provision: 1st January 2016 to 31st December 2019)U.K.

54.  Omit regulation 28 (transitional provision: 1st January 2016 to 31st December 2019).

Commencement Information

I30Reg. 54 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 29 (designated authority)U.K.

55.  For regulation 29 (designated authority) substitute—

“Duty of PRA to identify O-SIIs

29.  The PRA must identify O-SIIs in accordance with the provisions of this Part.”.

Commencement Information

I31Reg. 55 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Prospective

Regulation 30 (O-SIIs: location and nature)U.K.

F2456.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

Regulation 31 (identification of O-SIIs)U.K.

57.  In regulation 31 (identification of O-SIIs), [F25—

(a)in paragraph (1)—

(i)for “particular body”, substitute “particular group or body”,

(ii)for “relevant body”, both times it occurs, substitute “relevant institution”;

(b)in paragraph (2)—

(i)for “relevant body”, each time it occurs, substitute “relevant institution”,

(ii)in sub-paragraph (b), omit “or the European Union”,

(iii)in sub-paragraph (c), for “relevant body’s” substitute “relevant institution’s”,

(iv)in sub-paragraph (d), after “or” insert “, in the case of an institution,”].

Textual Amendments

Commencement Information

I32Reg. 57(a)(b)(i)(iii)(iv) in force at 29.12.2020, see reg. 1(2A)

I33Reg. 57(b)(ii) in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

Regulation 32 (notification, publication and review)U.K.

58.  In regulation 32 (notification, publication and review)—

(a)for the heading substitute “ Publication and review ”;

(b)omit paragraph (1);

[F26(c)in paragraph (3)—

(i)for the “bodies concerned” substitute “to the UK parent institution, UK parent financial holding company, UK parent mixed financial holding company or institution concerned”,

(ii)omit “, the Commission, the ESRB and EBA”.]

Textual Amendments

Commencement Information

I34Reg. 58 in force at 31.12.2020 on IP completion day (in accordance with 2020 c. 1, Sch. 5 para. 1(1)), see reg. 1(3)

[F27Regulation 33 (Appeals)U.K.

58A.  In regulation 33, after “the person”, insert “or a group for which the person is UK parent institution, UK parent financial holding company, or UK parent mixed financial holding company (a relevant group”),”.]

Textual Amendments

Commencement Information

I35Reg. 58A in force at 29.12.2020, see reg. 1(2A)

Regulation 34 (no requirement to maintain an O-SII buffer)U.K.

59.  For regulation 34 (no requirement to maintain an O-SII buffer) substitute—

[F28“PART 5ZAU.K.O-SII Buffers
CHAPTER 1U.K.Interpretation and power to impose O-SII buffer
Interpretation

34.—(1) For the purposes of this Part, a relevant O-SII is an O-SII, or part of an O-SII, which is—

(a)a ring-fenced body within the meaning of section 142A of FSMA;

(b)a large building society; or

(c)a financial holding company or a mixed financial holding company which—

(i)has a ring-fenced body or a large building society as a subsidiary; and

(ii)is required, whether by the PRA by a direction under section 192C of FSMA or otherwise, to comply with the requirements of the capital requirements regulation and Directive 2013/36/EU UK law on a sub-consolidated basis.

(2) In paragraph (1)(b) “large building society” means a building society where the sum total of the following two values exceeds £25 billion—

(a)the value of shares issued by the building society that are not deferred shares; and

(b)the value of deposits held in accounts with the building society where one or more of the account holders is a small business.

(3) In paragraph (1)(c), “Directive 2013/36/EU UK law”, “financial holding company” and “mixed financial holding company” have the meanings given in section 192O of FSMA.

(4) In paragraph (2)—

(a)“building society”, “deferred shares”, “deposit” and “share” have the meaning given by section 119 (interpretation) of the Building Societies Act 1986;

(b)a person is a small business only if the person is a small business for the purposes of section 7(10) (the funding limit) of the Building Societies Act 1986.

(5) For the purposes of this Part—

“buffer rate” has the meaning given in regulation 34ZA(2);

“FPC framework” has the meaning given in regulation 34ZB(1);

“O-SII buffer” has the meaning given in regulation 34ZA(1).

Power for the PRA to require an O-SII buffer to be maintained

34ZA.—(1) The PRA may require a relevant O-SII to maintain Common Equity Tier 1 capital, to be known as an “O-SII buffer”.

(2) The amount of capital which the PRA may require a relevant O-SII to hold (“the buffer rate”) must be expressed as a percentage of the relevant O-SII’s total risk exposure amount calculated in accordance with Article 92(3) of the capital requirements regulation.

CHAPTER 2U.K.United Kingdom buffer rates for O-SIIs
O-SII buffer rates: The FPC framework

34ZB.—(1) The FPC must have a framework for O-SII buffer rates in the United Kingdom established in accordance with this regulation (“the FPC framework”).

(2) The FPC framework must contain the following elements—

(a)a set of criteria for assessing the extent to which the failure or distress of a relevant O-SII might pose a risk to the financial system;

(b)a methodology for measuring the criteria and giving a relevant O-SII a single score in relation to the criteria; and

(c)in relation to each score that an O-SII may receive, a buffer rate that corresponds to the score.

(3) In paragraph (2)(a), a relevant O-SII is in distress only if it experiences a significant deterioration in its financial situation.

(4) In paragraph (2)(a) the criteria to be specified must each be—

(a)measurable; and

(b)capable of being applied to a relevant O-SII on an individual basis, a sub-consolidated basis and a consolidated basis.

(5) In paragraph (2)(c) the only buffer rates that the FPC may specify are 0%, 1%, 1.5%, 2%, 2.5% and 3%.

(6) The way in which buffer rates correspond to scores in the FPC framework—

(a)must be clear, precise and unambiguous;

(b)must ensure that a score corresponds to one buffer rate only;

(c)may not be expressed in terms of a discretion conferred on a person or body (including the FPC); and

may be expressed by way of a formula, an algorithm, a graph or a table.

(7) The Bank must publish each element of the FPC framework, together with the FPC’s justification for each element.

Determination by PRA of buffer rates for individual relevant O-SIIs

34ZC.—(1) The PRA may, in relation to each relevant O-SII, determine—

(a)whether or not to set a buffer rate for the O-SII; and

(b)where it does set a buffer rate, subject to paragraph (3), the level of the rate;

by applying the steps set out in paragraph (2).

(2) The steps set out in this paragraph are—

Step 1—determining level of consolidation

The PRA must choose one of the following bases on which to apply the criteria specified in the FPC framework to the relevant O-SII—

(a)an individual basis;

(b)a sub-consolidated basis; or

(c)a consolidated basis.

Step 2—deriving a framework buffer rate from the FPC framework

The PRA must derive a buffer rate from the FPC framework for the relevant O-SII (“a framework buffer rate”) by—

(a)applying the methodology of the FPC framework to obtain a score for the relevant O-SII; and

(b)ascertaining to what buffer rate the score corresponds under the FPC framework.

Step 3—setting a buffer rate for a relevant O-SII based on supervisory judgment

The PRA may, if it makes a sound supervisory judgment that it is appropriate to do so—

(a)set a buffer rate for a relevant O-SII, even if it has derived a framework buffer rate for the institution of 0% under Step 2;

(b)set a buffer rate for a relevant O-SII which is different to the framework buffer rate derived for the institution under Step 2; or

(c)set no buffer rate for a relevant O-SII, even if it has derived a framework buffer rate for the institution of other than 0% under Step 2.

Where the PRA sets a buffer rate under sub-paragraph (a) or (b) of this Step the rate must be 1%, 1.5%, 2%, 2.5% or 3%.

Step 4—setting a buffer rate for relevant O-SIIs based on framework buffer rate

Unless the PRA exercises the discretion in Step 3—

(a)where the PRA derives a framework buffer rate under Step 2 of 0% for the relevant O-SII, the PRA may not set a buffer rate for the institution; and

(b)where the PRA derives a framework buffer rate under Step 2 other than 0% for the relevant O-SII, the PRA must set the rate so derived as the buffer rate for the institution.

(3) Where paragraph (4) applies, the PRA may not apply an O-SII buffer rate to a relevant O-SII which exceeds the lower of—

(a)the sum of—

(i)the higher of the G-SII or the O-SII buffer rate applicable to the group at consolidated level, and

(ii)1% of the total risk exposure amount calculated in accordance with Article 92(3) of the capital requirements regulation; and

(b)3% of the total risk exposure amount calculated in accordance with Article 92(3) of the capital requirements regulation.

(4) This paragraph applies where the relevant O-SII is a subsidiary of—

(a)a G-SII; or

(b)an O-SII, which is subject to an O-SII buffer on a consolidated basis.

(5) Where a group is subject on a consolidated basis to both a G-SII buffer and an O-SII buffer, only the higher buffer is to apply.

CHAPTER 3U.K.Date of application and calculation of O-SII buffer
Date of application

34ZD.—(1) Where the PRA sets a buffer rate for a relevant O-SII under regulation 34ZC, the PRA must decide the date from which the O-SII must apply that rate in the calculation of its O-SII buffer.

(2) Where the PRA has set a buffer rate for a relevant O-SII under regulation 34ZC and determines that a buffer rate is no longer to be set for the O-SII under that regulation, the PRA must decide the date from which this takes effect.

Calculation of buffer

34ZE.—(1) The PRA must require a relevant O-SII to calculate its O-SII buffer by applying the buffer rate set for it under regulation 34ZC to all its exposures.

(2) The PRA must require the relevant O-SII, for the purposes of the calculation required under paragraph (1), to—

(a)determine the value of its exposures by applying the level of consolidation selected by the PRA under Step 1 of regulation 34ZC(2); and

(b)apply the buffer rate equally to all exposures, regardless of where they are located.

CHAPTER 4U.K.Publication, Review and Appeals
Publication: United Kingdom buffer rates

34ZF.—(1) Where the PRA sets a buffer rate for a relevant O-SII under regulation 34ZC, the PRA must publish the following information—

(a)the relevant O-SII to which the buffer rate applies;

(b)the buffer rate;

(c)the justification for setting the buffer rate;

(d)the date from which the relevant O-SII must apply the buffer rate;

(e)the level of consolidation to be used in the calculation of the O-SII buffer (as determined under Step 1 of regulation 34ZC(2)); and

(f)the fact that the O-SII buffer applies to exposures located anywhere in the world.

(2) Where the PRA determines that a buffer rate is no longer to be set for a relevant O-SII under regulation 34ZC, the PRA must publish the following information—

(a)the fact that the buffer rate is no longer set;

(b)the fact that the relevant O-SII is no longer required to maintain an O-SII buffer;

(c)the justification for ceasing to set the buffer rate; and

(d)the date from which the relevant O-SII may cease to apply the buffer rate.

(3) A reference to the PRA’s justification in paragraphs (1)(c) and (2)(c) includes the PRA’s justification for doing anything under Step 3 of regulation 34ZC(2).

(4) The PRA must not publish information under paragraph (1)(c) or (2)(c) if publication might jeopardise the stability of the financial system.

Review

34ZG.—(1) The FPC must review the elements of the FPC framework at least every second year.

(2) The PRA must review the following matters at least once every year—

(a)a buffer rate set under regulation 34ZC;

(b)a decision not to set a buffer rate under regulation 34ZC.

Appeals

34ZH.—(1) A person who is aggrieved by a decision of the PRA under regulation 34ZC may refer the matter to the Tribunal.

(2) The scope of such an appeal is limited to—

(a)the application of Step 2 of regulation 34ZC(2); and

(b)the exercise of the PRA’s discretion in Step 3 of regulation 34ZC(2).”].

Textual Amendments

Commencement Information

I36Reg. 59 in force at 29.12.2020, see reg. 1(2A)

Part 5A (Systemic Risk Buffer)U.K.

60.  For Part 5A (systemic risk buffer) substitute—

[F29“PART 5AU.K.Systemic Risk Buffer
Interpretation

34A.  In this Part—

“institution” means—

(a)

a credit institution, or

(b)

an investment firm which is for the time being designated by the PRA under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013;

“recognition decision” means a decision by the PRA to recognise a third country buffer rate;

“relevant entity” has the meaning given in regulation 34C(1);

“systemic risk buffer” has the meaning given in regulation 34C(1);

“third country buffer rate” has the meaning given in regulation 34B.

Third country buffer rates: recognition

34B.—(1) In this Part, a “third country buffer rate” means—

(a)in relation to an EEA state, a buffer rate set in accordance with Article 133 of the capital requirements directive as it has effect in EU law as amended from time to time, or if revoked, by its successor; or

(b)in relation to a country other than the United Kingdom which is not an EEA state, a buffer rate set by the relevant authority of that country, that the PRA considers serves a similar purpose to the buffer rates that may be set in accordance with Article 133 of the capital requirements directive as it has effect in EU law as amended from time to time, or if revoked, by its successor.

(2) The PRA may decide to recognise a third country buffer rate (“a recognition decision”).

(3) A recognition decision may relate to all institutions or institutions of a specified description.

(4) The PRA may revoke a recognition decision.

Requirement to maintain a systemic risk buffer

34C.—(1) The PRA may require an institution, a UK parent financial holding company, or a UK parent mixed financial holding company (a “relevant entity”) to hold additional Common Equity Tier 1 capital (“a systemic risk buffer”) in relation to some or all of the exposures referred to in regulation 34G, in order to prevent or mitigate macro-prudential or systemic risks which are not covered—

(a)under the capital requirements regulation; or

(b)by the countercyclical capital buffer, the G-SII buffer or the O-SII buffer provided for in these Regulations.

(2) If the PRA imposes a requirement on a relevant entity under paragraph (1), the PRA must specify—

(a)the exposures or subset of exposures to which that requirement relates;

(b)the buffer rate to be applied to those exposures.

(3) The only buffer rates that the PRA may specify for the purposes of paragraph (2) are 0.5%, 1%, 1.5%, 2%, 2.5%, 3%, 3.5%, 4%, 4.5% and 5%.

(4) For the purposes of this regulation, a risk is a “macro-prudential or systemic risk” if it is a risk of disruption in the financial system with the potential to have serious negative consequences to the financial system and the real economy in the United Kingdom.

(5) The PRA may impose a requirement under paragraph (1) on all relevant entities, or on relevant entities of a specified description, and may impose different requirements in relation to different relevant entities or classes of exposures.

Third country rates: application to relevant entities

34D.—(1) The PRA may require a relevant entity which has exposures located in a third country, in relation to which a recognition decision is in effect, to apply the third country buffer rate, in relation to its total exposures in that country.

(2) The powers in paragraph (1), in relation to a recognition decision which is limited to relevant entities of a specified description (in accordance with regulation 34B(3)), apply only to relevant entities falling within the description.

(3) Where a relevant entity is required to apply a third country buffer rate under paragraph (1), the PRA must specify, to the relevant entity concerned, the basis to be applied in valuing exposures from one of the following bases—

(a)an individual basis;

(b)a sub-consolidated basis; or

(c)a consolidated basis.

(4) Where the PRA require a relevant entity to apply a third country buffer rate under paragraph (1)—

(a)if the third country buffer rate addresses different risks to the systemic risk buffer rate applied under regulation 34C (the “regulation 34C rate”), the third country buffer rate may be applied cumulatively with the systemic risk buffer rate;

(b)if the third country buffer rate addresses the same risks as the regulation 34C rate, only the higher buffer rate is to be applied.

(5) The PRA may revoke a requirement imposed under paragraph (1).

(6) Where the PRA decides that a relevant entity must apply a third country buffer rate, the regulator must decide the date from which the relevant entity must apply the third country buffer rate.

(7) Where the PRA revokes a requirement that a relevant entity maintain a third country buffer, the regulator must decide the date from which the relevant entity must cease to apply the third country buffer rate.

Calculation of the systemic risk buffer

34E.—(1) Relevant entities must calculate the amount of the systemic risk buffer in accordance with the following formula—

where—

“SRB” is the systemic risk buffer;

“RT”is the buffer rate applicable to the amount of the total risk exposure of a relevant entity;

“ET” is the amount of the total risk exposure of the relevant entity calculated in accordance with Article 92(3) of the capital requirements regulation;

“I” is the index denoting the subset of exposures specified by the PRA under regulation 34C(2);

“RI” is the buffer rate applicable to the amount of the risk exposure of I;

“EI” is the risk exposure amount of a relevant entity for I calculated in accordance with Article 92(3) of the capital requirements regulation.

(2) The PRA may require a relevant entity to maintain a systemic risk buffer on—

(a)an individual basis;

(b)a sub-consolidated basis; or

(c)a consolidated basis.

Cumulative buffers

34F.—(1) Where a relevant entity is subject to a systemic risk buffer, applied in accordance with this Part, subject to paragraph (2), that buffer is to be cumulative with the O-SII buffer applied under Part 5ZA or the G-SII buffer set under Part 4.

(2) The sum of the systemic risk buffer rate and the O-SII buffer rate or G-SII buffer rate may not exceed 5%.

Systemic risk buffer exposures

34G.  A systemic risk buffer may apply to the following exposures—

(a)all exposures located in the United Kingdom;

(b)the following sectoral exposures located in the United Kingdom—

(i)all retail exposures to natural persons which are secured by residential property,

(ii)all exposures to legal persons which are secured by mortgages on commercial immoveable property,

(iii)all exposures to natural persons other than those specified in sub-paragraph (i),

(iv)all exposures to legal persons other than those specified in sub-paragraph (ii);

(c)all exposures located in a third country;

(d)sectoral exposures referred to in paragraph (b) which are located in a third country;

(e)a specified subset of the exposures referred to in paragraphs (a) to (d).

Notifications

34H.—(1) Where the PRA gives or revokes a recognition decision under regulation 34B, it must notify—

(a)the FCA;

(b)the authorities of the third country which are responsible for supervision of undertakings; and

(c)if different, the authorities of the third country responsible for setting the buffer rate.

(2) When the relevant entity to which one or more systemic risk buffers apply is a subsidiary undertaking of a parent undertaking which is incorporated under the law of a third country, the PRA must notify the competent authority of the third country concerned of any requirements imposed on the relevant entity under regulation 34C.

(3) Where a systemic risk buffer is applied to exposures in a third country, the PRA must notify the competent authority of the third country concerned.

Publication: systemic risk buffer

34I.—(1) Where the PRA requires a relevant entity to maintain a systemic risk buffer under regulation 34C, it must publish the following information on its website—

(a)the systemic risk buffer rate;

(b)the relevant entities to which the systemic risk buffer applies;

(c)the exposures to which the systemic risk buffer rate applies;

(d)the justification for setting or resetting the systemic risk buffer rate;

(e)the date from which the relevant entities are to apply the setting or the resetting of the systemic risk buffer rate; and

(f)the names of the countries where exposures located in those countries are recognised in the systemic risk buffer.

(2) The PRA must not publish information under paragraph (1)(d) if publication might jeopardise the stability of the financial system.

(3) Where the PRA revokes a requirement that a relevant entity maintain a systemic risk buffer rate under regulation 34C, it must publish—

(a)the fact that the requirement has been revoked;

(b)the justification for its decision to revoke the requirement; and

(c)the date from which the relevant entity may cease to apply the systemic risk buffer rate.

Publication: third country buffer rates

34J.—(1) Where the PRA recognises a third country buffer rate under regulation 34B, it must publish—

(a)the buffer rate; and

(b)the justification for recognising the buffer rate.

(2) Where the PRA requires a relevant entity to apply a third country buffer rate under regulation 34D, it must publish—

(a)the date from which the relevant entity must apply the third country buffer rate;

(b)the location of the exposures to which the third country buffer rate relates;

(c)the level of consolidation which applies in the calculation of the third country buffer; and

(d)the justification for its decision under regulation 34D(1).

(3) The PRA must not publish information under paragraph (1)(b) or (2)(d) if publication might jeopardise the stability of the financial system.

(4) Where the PRA revokes a requirement that a relevant entity apply a third country buffer rate under regulation 34D, it must publish—

(a)the fact that the requirement has been revoked;

(b)the justification for its decision to revoke the requirement; and

(c)the date from which the relevant entity may cease to apply the third country buffer rate.

Review

34K.  The PRA must review the following matters at least once every second year—

(a)the decision to require a relevant entity or class of relevant entities to maintain a systemic risk buffer under regulation 34C(1);

(b)a buffer rate set under regulation 34C(2);

(c)the exposures, or subset of exposures, to which that buffer rate is applied;

(d)a decision that a relevant entity must maintain a third country buffer under regulation 34D;

(e)a decision as to the level of consolidation to apply in relation to the application of a third country buffer rate under regulation 34D(3).

Appeals

34L.—(1) A person who is aggrieved by a decision of the PRA under regulation 34C may refer the matter to the Tribunal.

(2) The scope of such an appeal is limited to the buffer rate set under regulation 34C(2).”]M2.

Textual Amendments

Commencement Information

I37Reg. 60 in force at 29.12.2020, see reg. 1(2A)

Marginal Citations

M2In regulation 34C, Building Societies Act 1986 c.53. In regulation 34I, Directive 2013/36/EU, OJ No. L. 176, 27.6.2013, p338-436.

[F30Combined buffer requirementU.K.

60A.  In regulation 35, after “institutions” insert “, parent financial holding companies and parent mixed financial holding companies”.]

Textual Amendments

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