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
