FPC

Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015 Published

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On January 13, 2015, the Capital Requirements (Capital Buffers and Macro-prudential Measures) (Amendment) Regulations 2015 were published.

The Regulations amend the Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014 to introduce a systemic risk buffer (SRB) that will apply to ring-fenced banks (RFBs) and certain large building societies. This measure implements Articles 133 and 134 of the Capital Requirements Directive IV (CRD IV).

The Financial Policy Committee (FPC) will be responsible for setting out the framework for determining which institutions should hold the buffer and, if so, how large the buffer should be. It will need to publish this methodology by May 31, 2016. The Prudential Regulation Authority (PRA) will be responsible for applying the framework and will have ultimate discretion over which firms must hold the buffer and its size.

The Regulations were made on January 12, 2015 and come into force, unless otherwise stated, on May 31, 2016. The systemic risk buffer is applicable from January 1, 2019.  Regulations.

UK PRA and FCA Publish Final Policy on Implementing the FPC’s LTI Ratios

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On October 1, the Prudential Regulation Authority (PRA) issued PS9/14 and the FCA published FG14/8 setting out their final policies on implementing the Financial Policy Committee’s (FPC) recommendation on loan to income (LTI) ratios in mortgage lending.

The policies were published after the FPC noted that acting against the excessive indebtedness caused by a high number of mortgages with high LTI ratios will make the financial system more stable.

The FPC made its recommendation on LTI ratios in June. The FPC recommended that the PRA and the FCA should ensure that mortgage lenders limit the proportion of mortgages at LTI multiples of 4.5 and above to no more than 15% of their new residential mortgages. The final policies of the PRA and FCA include permitting the application of the LTI limit to be at a group level rather than at the level of each regulated entity.  PRA Policy Statement.  FCA Finalized Guidance.