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ARTICLE · 14 APRIL 2015

Financial Policy Committee Given Certain Macro-Prudential Powers Of Direction

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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 KingdomFinance and Banking
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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. 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.

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