Guidance

SS45/15 – The UK leverage ratio framework

Chapter

Overview – the UK leverage ratio

Printed on: 06/11/2024

Rulebook at: 05/08/2024

1.A

Overview – the UK leverage ratio

1.A.1

The Leverage Ratio – Capital Requirements and Buffers Part applies to the following firms on the following bases:

  1. i. All firms with retail deposits equal to or greater than £50 billion or foreign assets equal to or greater than £10 billion, when calculated on an individual basis are in scope.[4] Such firms must comply with the Part on an individual basis (subject to section 4 below), unless they are otherwise subject to the Part on the basis of their own consolidated situation because they are either: CRR consolidation entities referred to in (ii); or a ring fenced body identified in (iii) that is the ultimate parent within its RFB sub-group.
  2. ii. CRR consolidation entities meeting either threshold referred to in (i) above on the basis of their consolidated situations are in scope. They must comply with the Part on a consolidated basis.[5]
  3. iii. Ring-fenced bodies that have been required by the PRA to comply with the CRR on an RFB sub-consolidated basis and whose RFB sub-group meets either threshold referred to in (i) above on an RFB sub-consolidated basis are in scope. They must comply with the requirement on the same RFB sub-consolidated basis that they are required to comply with the CRR.
  • 4. For this purpose, foreign assets means financial assets for which the counterparty is resident in a country or territory outside the UK, as reported in LV44, line 0050.
  • 5. Where necessary for this purpose, references in this SS to firm, should be read as including a CRR consolidation entity.
  • 05/08/2024

1.A.2

The minimum leverage ratio capital requirement, which must be met at all times, is 3.25% of the leverage exposure measure (LEM) defined in the Leverage Ratio (CRR) Part of the PRA Rulebook. The LEM excludes assets constituting claims on central banks, where they are matched by liabilities, denominated in the same currency and of identical or longer maturity. Further conditions apply where claims on central banks are held in omnibus accounts – these are described in Chapter 7. Mirroring the risk-weighted capital framework, three quarters of this requirement must be met with Common Equity Tier 1 (CET1) capital instruments. The requirement must otherwise be met with Tier 1 capital, but additional Tier 1 capital must have a conversion trigger in relation to a firm’s risk-weighted CET1 ratio of at least 7% in order to count towards the leverage ratio minimum. CRR transitional measures affecting Tier 1 capital apply to the definition of Tier 1 for the purposes of the leverage ratio, including the IFRS 9 transitional the PRA encouraged firms to use as part of the Covid-19 response,[6] and the continued eligibility of certain AT1 instruments.[7]

  • 6. Article 473a of the CRR.
  • 7. Article 494b of the CRR.
  • 05/08/2024

1.A.3

Firms in scope of the leverage ratio minimum capital requirement are subject to buffers in addition to this minimum. These buffers must be met with CET1 resources and are set out in more detail in Chapter 2.

  • 05/08/2024

1.A.4

Firms that are not in scope of the leverage ratio requirement are nevertheless expected to manage their leverage risk so that their leverage ratio – to be calculated based on the same rules as the in-scope firms - does not ordinarily fall below 3.25%. This PRA expectation is further described in Chapter 5.

  • 05/08/2024