The Prudential Regulation Authority published a statement inviting firms to apply for a temporary modification of the application of the Leverage Ratio, Public Disclosure and Reporting Leverage Ratio parts of the PRA Rulebook to them. The modification is available to firms that are currently subject to the UK leverage ratio framework.  The statement follows a recommendation in July from the Financial Policy Committee of the Bank of England on the composition of the total exposure measure for the purposes of the leverage ratio, which stated that when applying its rules on the leverage ratio, the PRA should consider allowing firms to exclude from the calculation of the total exposure measure those assets constituting claims on central banks where they are matched by deposits accepted by the firm that are denominated in the same currency and of identical or longer maturity. 

The PRA has implemented the recommendation and has published a direction for modification by consent, which sets out the relevant rule modifications in relation to the definition of the total exposure measure of the leverage ratio framework. The revised definition of the total exposure measure under the rule modification will flow through to firms’ obligations regarding the minimum leverage ratio requirement, the countercyclical leverage ratio buffer and the additional leverage ratio buffer. The modification does not change the reporting and disclosure requirements under the Capital Requirements Regulation and UK leverage ratio regime. 

Once a firm applies for the rule modification, it is expected that the direction for modification by consent will be automatically issued to allow for the modified rules to apply to that firm. The PRA intends to publish a list of all firms that have applied for the rule modification on September 29, 2016 and plans to update the list monthly.

View the statement.

View the direction for modification by consent.