On February 2, 2015, HM Treasury published the outcome to its consultation on the leverage ratio framework. The Financial Policy Committee ("FPC") previously recommended that HM Treasury enable the FPC to give directions to the Prudential Regulation Authority ("PRA") to set leverage ratio requirements and buffers for PRA-regulated institutions. HM Treasury's consultation paper sought views on how to implement the FPC's recommendations and grant the FPC such powers of direction, and also included draft legislation. The FPC stated that the directions should include a power for the FPC to set a minimum leverage ratio requirement, a supplementary leverage ratio buffer to apply to global systemically important banks and major UK institutions, as well as a countercyclical ratio buffer. The outcome sets out the Government's position in light of the consultation responses, stating that the Government believes the FPC is well-placed to consider the level of leverage in the UK financial system which is prudent, whilst the system continues to contribute to economic growth. The Government also intends to grant the FPC a power to set supplementary ratio buffers. As for the countercyclical ratio buffer, the Government states that the FPC is required to act proportionally when exercising this power, and that this requirement to act proportionally justifies the granting of this power to the FPC.
The outcome is available at: https://www.gov.uk/government/consultations/financial-policy-committees-leverage-ratio-framework.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
