ARTICLE
14 April 2015

Financial Policy Committee Given Certain Macro-Prudential Powers Of Direction

AO
A&O Shearman

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On March 25, 2015, UK legislation was enacted which gives the BoE’s FPC power to issue directions to the PRA and the FCA for certain macro-prudential measures.
United Kingdom Finance and Banking

On March 25, 2015, UK legislation was enacted which gives the BoE's FPC power to issue directions to the PRA and the FCA for certain macro-prudential measures. The FPC will be able to give a direction to (i) specify a minimum leverage ratio for UK banks and PRA-designated UK investment firms; (ii) require UK banks and PRA-designated UK investment firms for which the PRA sets a strategic risk buffer to also maintain an additional leverage ratio specified by the FPC; (iii) require globally systemically important institutions to hold sufficient Tier 1 capital to satisfy an additional leverage ratio specified by the FPC; and (iv) require UK banks and PRA-designated UK investment firms to hold sufficient capital to maintain a countercyclical leverage buffer. The legislation comes into force on April 6, 2015, except for the power of direction for firms required to hold a strategic risk buffer which comes into force on January 1, 2019.

The legislation is available at: http://www.legislation.gov.uk/uksi/2015/905/pdfs/uksi_20150905_en.pdf.

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