The Capital Requirements (Capital Buffers and Macro-prudential Measures) Regulations 2014

Made: 1st April 2014

Laid before Parliament: 3rd April 2014

Coming into force in accordance with regulation 1

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PART 1 — Introductory provisions

Citation, commencement and cessation

1

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Interpretation

2

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Conferral of functions or discretion on the FPC

3

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Appeals: application of Part 9 of the Financial Services and Markets Act 2000

4

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PART 2 — Capital conservation buffer

Transitional provisions: 1st January 2016 to 31st December 2018

5

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Exemption for small and medium-sized investment firms

6

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PART 3 — Countercyclical Capital Buffer

CHAPTER 1 — Overview and interpretation

Designated authority

7

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Meaning of “UK institution”

8

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CHAPTER 2 — Exposures located in the United Kingdom

The buffer guide

9

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Countercyclical buffer rate

10

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Date from which changes to the buffer rate apply

11

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Announcement of changes to the buffer rate

12

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CHAPTER 3 — Exposures located outside the United Kingdom

Buffer rates for EEA exposures: before 1st January 2016

13

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Buffer rates for EEA exposures: on or after 1st January 2016

14

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Buffer rates for exposures outside the EEA

15

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Buffer rates: integer multiples of 0.25%

16

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Date of application of buffer rates

17

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Announcement of changes to buffer rates

18

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CHAPTER 4 — Institution-specific countercyclical capital buffers

Calculation of buffer before 1st January 2016

19

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Exemption for small and medium-sized investment firms

20

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PART 4 — G-SII Buffer

Designated authority

21

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G-SIIs: location and nature

22

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Identification methodology

23

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Sub-catgories of G-SII and corresponding buffer rates

24

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Re-allocation in exercise of sound supervisory judgement

25

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Notification, publication and review

26

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Appeals

27

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Transitional provision: 1st January 2016 to 31st December 2019

28

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PART 5 — O-SIIs

Designated authority

29

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O-SIIs: location and nature

30

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Identification of O-SIIs

31

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Notification, publication and review

32

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Appeals

33

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No requirement to maintain an O-SII buffer

34

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PART 6 — Combined buffer requirement

Combined buffer requirement

35

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PART 7 — Macro-prudential measures: procedure

Amendments to the Bank of England Act 1998

36

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Signed

Anne Milton — Mark Lancaster — Two of the Lords Commissioners of Her Majesty's Treasury — 2014-04-01

Explanatory note

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Footnotes

[^f00001]: S.I. 2012/1759.

[^f00002]: 1972 c.68. Section 2(2) was amended by section 27 of the Legislative and |Regulatory Reform Act 2006 (c.51) and by section 3 of, and the Schedule to, the European Union (Amendment) Act 2008 (c.7). By virtue of the amendment of section 1(2) by section 1 of the European Economic Area Act 1993 (c.51), regulations may be made under s2(2) of the European Communities Act 1972 to implement obligations of the United Kingdom created or arising by or under the Agreement on the European Economic Area signed at Oporto on 2nd May 1992 (Cm 2073) and the Protocol adjusting the Agreement signed in Brussels on 17th March 1993 (Cm 2183).

[^f00003]: The terms “authorisation”, “financial holding company”, “institution”, “mixed financial holding company” and “subsidiary” are defined in Article 4(1) of the capital requirements regulation and apply here by virtue of regulation 2(2)(a).

[^f00004]: The terms “authorisation”, “financial holding company”, “institution”, “mixed financial holding company” and “subsidiary” are defined in Article 4(1) of the capital requirements regulation and apply here by virtue of regulation 2(2)(a).

[^f00005]: The terms “authorisation”, “financial holding company”, “institution”, “mixed financial holding company” and “subsidiary” are defined in Article 4(1) of the capital requirements regulation and apply here by virtue of regulation 2(2)(a).

[^f00006]: OJ no L331, 15/12/2010, p1.

[^f00007]: The Financial Policy Committee was established by section 9B of the Bank of England Act 1998 (c.11), which was inserted by section 4(1) of the Financial Services Act 2012 (c. 21).

[^f00008]: 2000 c. 8.

[^f00009]: The terms “G-SII” and “global systemically important institution” are used in Article 131 of the capital requirements directive. “Systemically important institution” is defined in Article 3(30) of the capital requirements directive and applies here by virtue of regulation 2(2)(a).

[^f00010]: The terms “O-SII” and “other systemically important institution” are used in Article 131 of the capital requirements directive. “Systemically important institution” is defined in Article 3(30) of the capital requirements directive and applies here by virtue of regulation 2(2)(a).

[^f00011]: “authorisation”, “consolidated basis”, “financial holding company”, “institution”, “investment firm”, “mixed financial holding company”, “sub-consolidated basis” and “subsidiary” are all defined in these Articles.

[^f00012]: 2000 c.8. Section 417 was amended by section 48(1) of the Financial Services Act 2012 (c. 21), S.I. 2010/22, S.I. 2012/916 and S.I. 2013/3115. There are other amending enactments, but none is relevant to these Regulations. Section 417 includes definitions of “capital requirements directive”, “capital requirements regulation” and “Tribunal”.

[^f00013]: OJ no L 124, 20.5.2003, p36.

[^f00014]: This regulation ceases to have effect on 1st January 2016. See regulation 1(5).

[^f00015]: This regulation commences on 1st January 2016. See regulation 1(3).

[^f00016]: This regulation ceases to have effect on 1st January 2016. See regulation 1(5).

[^f00017]: 1998 c. 11.

[^f00018]: Section 2AA was inserted by S.I. 2013/3115.

[^f00019]: Section 9H was inserted by section 4(1) of the Financial Services Act 2012.

[^f00020]: Section 9I was inserted by section 4(1) of the Financial Services Act 2012.

[^f00021]: Section 9Q was inserted by section 4(1) of the Financial Services Act 2012.

[^f00022]: Section 9U was inserted by section 4(1) of the Financial Services Act 2012.

Editorial notes

PART5A — Systemic Risk Buffer

CHAPTER1 — Introduction

Meaning of “EEA buffer rate”

34A

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Meaning of “individual basis”

34B

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Meaning of “mapping”

34C

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Meaning of “SRB institution”

34D

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Designated authorities

34E

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CHAPTER2 — United Kingdom rates

FPC: criteria, methodology and mapping

34F

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PRA: applying the systemic risk buffer

34G

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Pre-notification to EEA and third country authorities

34H

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Appeals

34I

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CHAPTER3 — EEA rates

Recognition of EEA buffer rates

34J

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Notification

34K

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CHAPTER4 — Maintenance and calculation of systemic risk buffer

Maintenance of systemic risk buffer

34L

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CHAPTER 5 — Miscellaneous

Date of application

34M

• (1) Where the PRA sets a buffer rate for an SRB institution under regulation 34G, the PRA must decide the date from which the SRB institution must apply the buffer rate in the calculation of its systemic risk buffer.

• (2) Where the PRA decides that an SRB institution is no longer required to maintain a systemic risk buffer, the PRA must decide the date from which the SRB institution may cease to maintain the systemic risk buffer.

• (3) Where the PRA or FCA decide that an institution must apply an EEA buffer rate under regulation 34J, the PRA or FCA (as the case may be) must decide the date from which the institution must apply the buffer rate in the calculation of its systemic risk buffer.

Publication

34N

• (1) The Bank must publish—

• (a) the set of criteria specified by the FPC in accordance with regulation 34F(1);

• (b) the methodology created by the FPC in accordance with regulation 34F(4);

• (c) the mapping.

• (2) When the Bank publishes a set of criteria, a methodology or a mapping, the Bank must also publish the FPC’s justification for the set of criteria, methodology or mapping (as the case may be).

• (3) Where the PRA sets a buffer rate for an SRB institution under regulation 34G, the PRA must publish—

• (a) the buffer rate;

• (b) the SRB institution to which the buffer rate applies;

• (c) the justification for the systemic risk buffer;

• (d) the date from which the SRB institution must apply the buffer rate;

• (e) the level of consolidation which applies pursuant to regulation 34L; and

• (f) the fact that the systemic risk buffer applies to exposures located anywhere in the world (subject to the application of EEA buffer rates recognised under regulation 34J).

• (4) Where the PRA decides that an SRB institution is no longer required to maintain a systemic risk buffer under regulation 34G, the PRA must publish—

• (a) the fact that the SRB is no longer required to maintain the systemic risk buffer;

• (b) the justification for ceasing to apply the systemic risk buffer; and

• (c) the date from which the SRB institution may cease to apply the buffer rate.

• (5) The reference to the justification in paragraphs (3)(c) and 4(b) includes the PRA’s reasons for doing any of the matters referred to in sub-paragraphs (a) to (c) of regulation 34G(5).

• (6) Where the PRA recognises an EEA buffer rate under regulation 34J—

• (a) the PRA must publish—

• (i) the EEA buffer rate;

• (ii) its decision under regulation 34J(4)(b) as to which institutions must apply the EEA buffer rate in the calculation of their systemic risk buffers;

• (iii) the date from which those institutions must apply the EEA buffer rate;

• (iv) the location of the exposures to which the EEA buffer rate applies;

• (v) the level of consolidation which applies pursuant to regulation 34L; and

• (vi) the justification for recognising the EEA buffer rate and for its decision under regulation 34J(4)(b);

• (b) the FCA must publish—

• (i) its decision under regulation 34J(4)(b) as to which institutions must apply the EEA buffer rate in the calculation of their systemic risk buffers;

• (ii) the date from which those institutions must apply the EEA buffer rate;

• (iii) the level of consolidation which applies pursuant to regulation 34L; and

• (iv) the justification for its decision under regulation 34J(4)(b).

• (7) The PRA and FCA must not publish any information pursuant to paragraph (3)(c), (4)(b), (6)(a)(vi) or (6)(b)(iv) if publication might jeopardise the stability of the financial system.

• (8) The date on which the PRA publishes the buffer rate under paragraph (3) must be at least one month after the date on which the PRA gives notification under regulation 34H.

Review

34O

The authority specified in the first column of Table 2 must review the matters set out in second column of Table 2 at least every second year.

Authority conducting review	Matter to be reviewed
FPC	The set of criteria specified under regulation 34F(1).The methodology created in accordance with regulation 34F(4).The mapping.
PRA	A buffer rate set under regulation 34G.A decision under regulation 34G not to set a buffer rate.An EEA buffer rate recognised under regulation 34J.A decision under regulation 34J that an institution must apply an EEA buffer rate in the calculation of its systemic risk buffer.A decision under regulation 34L as to the level of consolidation at which a buffer rate must be applied.
FCA	A decision under regulation 34J that an institution must apply an EEA buffer rate in the calculation of its systemic risk buffer.A decision under regulation 34L as to the level of consolidation at which a buffer rate must be applied.

Prohibition on affecting the internal market

34P

The PRA and FCA must, in the exercise of their respective functions and discretions under this Part, ensure that a systemic risk buffer does not have a disproportionate adverse effect on the whole or any part of the financial system of other EEA States or the Union as a whole, such that the adverse effect forms or creates an obstacle to the functioning of the internal market within the meaning of Article 26(2) of the Treaty on the Functioning of the European Union.

PART 5ZA — O-SII Buffers

CHAPTER 1 — Interpretation and power to impose O-SII buffer

Interpretation

Power for the PRA to require an O-SII buffer to be maintained

34ZA

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CHAPTER2 — United Kingdom buffer rates for O-SIIs

O-SII buffer rates: The FPC framework

34ZB

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Determination by PRA of buffer rates for individual relevant O-SIIs

34ZC

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CHAPTER3 — Date of application and calculation of O-SII buffer

Date of application

34ZD

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Calculation of buffer

34ZE

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CHAPTER4 — Publication, Review and Appeals

Publication: United Kingdom buffer rates

34ZF

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Review

34ZG

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Appeals

34ZH

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Interpretation

Third country buffer rates: recognition

Requirement to maintain a systemic risk buffer

Third country rates: application to relevant entities

Calculation of the systemic risk buffer

Cumulative buffers

Systemic risk buffer exposures

Notifications

Publication: systemic risk buffer

Publication: third country buffer rates

Review

Appeals

Overview

Buffer rate rules

12A

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Buffer rates for EEA exposures: savings provision

Buffer rates for exposures outside the UK

Application of the institution-specific countercyclical capital buffer to holding companies

19A

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Exemption for small and medium-sized investment firms

Duty of PRA to identify G-SIIs

Duty of PRA to identify O-SIIs

Publication and review