UK: The PRA Leverage Ratio – Implementation Draws Near

Last Updated: 29 September 2015
Article by Ian Kelly

Most Read Contributor in UK, August 2017

The PRA has proposed that large UK banks meet a minimum 3% leverage ratio requirement from 1 January 2016. The requirement would apply to banks with more than £50 billion in deposits.

Unlike the Basel III / CRD IV leverage ratio, the PRA's proposed leverage ratio is layered with additional systemic risk add-ons. This makes the UK requirement more onerous than the EU version of the leverage ratio.

The PRA's consultation paper proposes that this 3% minimum be supplemented with additional leverage add-ons for banks that are systemically important or that have exposures that are subject to a Countercyclical Capital Buffer (CCB).

When the CRD IV leverage ratio becomes binding in 2018, UK banks will effectively have to comply with two separate (though very similar) leverage requirements. The level of the CRD IV leverage ratio has not yet been finalised but is expected to be 3% - i.e. in line with the Basel Committee's provisional leverage requirement. The PRA leverage ratio is likely to be more onerous given its additional leverage buffers, detailed below.

The PRA's definition of 'Leverage'

The CRD IV ratio won't contain a binding minimum requirement until 2018, whereas the PRA leverage ratio is due to apply to most large banks from 1 January 2016.

The PRA proposes that its UK leverage ratio follow the same definition of 'total assets' as the European leverage ratio. The numerator definition is also broadly similar. However, there is a slight technical difference between the numerator definition for the CRD IV leverage ratio and the PRA leverage ratio: In the CRD IV leverage ratio, a certain amount of 'Other Tier 1' items can be grandfathered forward from the previous regime into the current Additional Tier 1 bracket and therefore counted within the numerator, whereas these grandfathered instruments cannot be included in the PRA leverage ratio. So banks that have grandfathered Additional Tier 1 (AT1) capital instruments may have a higher CRD IV leverage ratio than their PRA leverage ratio.

The PRA's proposed Leverage Ratio 'add-ons'

The Countercyclical Leverage Buffer (CCLB)

UK banks and building societies may also be subject to a CCLB which the FPC (and other national regulators) can activate if it fears overheating or unsustainable growth in particular sectors of an economy. The CCLB will be set at 35% of the level of any CCB in effect. For example, if the FPC applies a 1% CCB to certain UK exposures then a CCLB rate of 0.35% will apply to those UK exposures. The CCLB applies in addition to the minimum of 3% and any Additional Leverage Ratio Buffer that applies (see below).

Similarly, where regulators in another EU member state or third country decide to apply a CCB in respect of exposures in that country, UK banks will have to hold a CCB and a CCLB in respect of their exposures in that country. As above the CCLB will be calibrated as 35% of the CCB. Currently only Norway, Sweden and Hong Kong have decided to apply a CCB to their exposures.

The Additional Leverage Ratio Buffer (ALRB)

A further requirement, the ALRB, will apply to globally systemically important banks (G-SIBs) and other major domestic UK banks and building societies, including banks that are subject to ring-fencing requirements. The ALRB will be calibrated as 35% of the combined systemic risk buffers that apply to the bank in question.

For example, if a bank is subject to a combined systemic risk buffer of 2% its ALRB will be 0.7%, in addition to the minimum of 3% and any CCLB in effect.

Reporting and disclosure

In addition to the minimum leverage requirements, the PRA is also proposing to introduce a new reporting form (the FSA083) which banks will be required to complete and submit quarterly from 2017. During 2016 the affected banks will be required to complete and submit a transitional form (the FSA084). The new forms will collect data on the banks' breakdown of assets.

The PRA proposes that banks disclose data on their leverage ratio and the exposure measure on a quarterly basis. Where there are differences between a bank's PRA leverage ratio and its CRR leverage ratio (e.g. because the PRA leverage ratio does not recognise grandfathered AT1 capital instruments) the bank must explain why this is so.

This presents an additional burden for UK banks compared to their European peers, as they will be required to complete two sets of regulatory reports on leverage (i.e. COREP and PRA reporting) and two sets of leverage ratio disclosures (i.e. CRD IV Pillar 3 leverage data and the PRA quarterly leverage disclosure).

What can firms do to prepare?

This will be the first time in decades that a binding leverage requirement has applied to UK banks so it will be important to implement it accurately. The PRA leverage ratio requirement will be considerably more onerous than the CRD IV leverage ratio in many ways. The timeline for compliance is also very compressed with the requirement applying from 1 January 2016.

Banks must first consider the £50 billion deposit threshold to determine if they are in scope. Banks that are in scope will need to review the PRA's proposed leverage reporting forms in order to determine if you they will be able to complete these in an accurate and complete way. Affected banks must ensure that they have access to up-to-date data that will enable them to comply with the daily calculation requirement from 2017. Their systems managers  will also need to consider if any of their assets are subject to a CCB requirement, which would also trigger an additional countercyclical leverage requirement. 

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.