UK Prudential Regulation Authority Publishes Its Final Approach To Implementing The Systemic Risk Buffer

On December 5, 2016, the Prudential Regulation Authority published a Statement of Policy setting out its approach to the implementation of the systemic risk buffer. The SRB is used to prevent and mitigate long term non-cyclical macro-prudential or systemic risks not covered by the Capital Requirements Regulation. It is a firm-specific buffer based on a firm's risk weighted exposures and must be met with Common Equity Tier 1 capital. The Statement of Policy is relevant to ring-fenced bodies under the Financial Services and Markets Act 2000 and large building societies that hold more than £25 billion in deposits. These are jointly referred to as "SRB institutions." The UK Independent Commission on Banking recommended that the UK's systemically important SRB institutions be held to a higher capital standard. In addition to these recommendations, the UK legislation implementing the systemic risk buffer requires that the PRA apply the Financial Policy Committee framework as