Friday 31 October 2014

UK: FPC review of the leverage ratio

The Financial Policy Committee published the results of its review of the leverage ratio today: see here (pdf). In its document, the FPC sets out the power it would like HM Treasury to grant it: the power to direct the Prudential Regulation Authority to set leverage ratio requirements and buffers for PRA-regulated banks, building societies and investment firms, including: a minimum leverage ratio requirement; a supplementary leverage ratio buffer that will apply to G-SIBs and other major domestic UK banks and building societies, including ring-fenced banks; and a countercyclical leverage ratio buffer.

The document explains the FPC's intentions in respect of this new power of direction. For example, the minimum leverage ratio requirement would be set at 3%.

Publication of the review was accompanied by an exchange of letters between the Governor of the Bank of England and the Chancellor of the Exchequer: see here (pdf) and here (pdf).

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