The Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014

CHAPTER 2 U.K. Exposures located in the United Kingdom

The buffer guide U.K.

9.—(1) The FPC must calculate for every quarter a buffer guide as a reference to guide its exercise of judgement in assessing and setting the buffer rate in accordance with regulation 10.

(2) The buffer guide must—

(a) reflect, in a meaningful way, the credit cycle and the risks due to excess credit growth in the United Kingdom; and

(b) duly take into account the specificities of the economy of the United Kingdom.

(3) The buffer guide must be based on the deviation of the ratio of credit to gross domestic product from its long term trend, taking into account—

(a) an indicator of the growth of levels of credit within the United Kingdom and, in particular, an indicator reflecting the changes in the ratio of credit granted in the United Kingdom to gross domestic product; F1 ...

F1 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Reg. 9(3)(b) and word omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 40 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Countercyclical buffer rate U.K.

10.—(1) The FPC must assess and set a buffer rate for the United Kingdom.

(2) The purpose of the buffer rate is to enable institutions with exposures located in the United Kingdom to calculate their institution-specific countercyclical capital buffers.

(3) The buffer rate must be assessed and set on a quarterly basis, taking into account—

(a) the buffer guide calculated in accordance with regulation 9(1);

F2 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F2 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) any other variables that the FPC considers relevant for addressing cyclical systemic risk.

(4) The buffer rate must be expressed as a percentage of the total risk exposure of institutions with exposures located in the United Kingdom.

(5) Total risk exposure must be calculated in accordance with Article 92(3) of the capital requirements regulation.

(6) The buffer rate must be—

(a) set between 0% and 2.5%, except where the matters referred to in paragraph (3) justify a higher rate; and

(b) an integer multiple of 0.25%.

Textual Amendments

F2 Reg. 10(3)(b)(c) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 41 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Date from which changes to the buffer rate apply U.K.

11.—(1) Where the FPC—

(a) sets the buffer rate above zero for the first time; or

(b) increases the buffer rate;

it must decide the date from which UK institutions must apply the buffer rate for the purposes of calculating their institution-specific countercyclical capital buffers.

(2) The date referred to in paragraph (1) must be 12 months after the date when the buffer rate is published in accordance with regulation 12(1), unless an earlier date is justified on the basis of exceptional circumstances.

(3) Where the FPC reduces the buffer rate, it must decide on an indicative period during which no increase in that rate is expected.

(4) The indicative period referred to in paragraph (3) is not be binding on the FPC.

Announcement of changes to the buffer rate U.K.

12.—(1) The Bank must publish the following information on its website—

(a) the buffer rate assessed and set by the FPC in accordance with regulation 10(1);

(b) the relevant ratio of credit to gross domestic product and its deviation from the long-term trend;

(c) the buffer guide calculated by the FPC in accordance with regulation 9;

(d) the reasons for the FPC's decision on the level of the buffer rate.

(2) Where the FPC decides to increase the buffer rate, the Bank must publish on its website—

(a) the date from which UK institutions must apply the new buffer rate for the purposes of calculating their institution-specific countercyclical capital buffer; and

(b) any exceptional circumstances which justify any decision by the FPC to require institutions to apply the new buffer rate less than a year after it is published.

(3) Where the FPC decides to decrease the buffer rate, the Bank must publish on its website the indicative period referred to in regulation 11(3) and the FPC's reasons for choosing that period.

F3 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F3 Reg. 12(4)(5) omitted (31.12.2020) by virtue of The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 42 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

[F4 Buffer rate rules U.K.

12A.— (1) Nothing in paragraph 17(9)(b) of Schedule 6A to the Bank of England Act 1998 F5 ... prohibits the making of a rule by the PRA F5 ... that references a countercyclical capital buffer rate set by the FPC under this Part.]

Textual Amendments

F4 Reg. 12A inserted (31.12.2020) by The Capital Requirements (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1401), regs. 1(3), 43 (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F5 Words in reg. 12A(1) omitted (1.1.2022) by virtue of The Financial Services Act 2021 (Prudential Regulation of Credit Institutions and Investment Firms) (Consequential Amendments and Miscellaneous Provisions) Regulations 2021 (S.I. 2021/1376), regs. 1(3), 17(5)