Telephone 020 3813 2890 for a free no obligation chat about your regulatory requirements with one of our compliance consultants.
© Compound Growth Limited 2012 - 2018 | Terms of Use
Registered in England and Wales as limited company number 07626537 - Registered Office 120 Pall Mall, London, SW1Y 5EA
We use cookies, if you consent to this use, please continue to browse our site.
Here to help with Regulation and Compliance
UK Countercyclical Capital Buffer Rate Reduced
6th July 2016
Yesterday the Bank of England announced it would immediately cut the countercyclical capital buffer rate for UK firms down to zero.
Reduction to UK Countercyclical Capital Buffer Rate
Effective yesterday, the 5th July 2016, the Bank of England’s Financial Policy Committee (the FPC) reduced the capital requirements for UK banks.
Announced in a Bank of England biannual Financial Stability Report, the countercyclical capital buffer rate has been reduced from 0.5 percent of a bank’s risk weighted assets down to zero. This is with the aim of increasing a bank’s capacity to lend to households and businesses with an estimated £150bn extra capital that could be injected into the economy following the UK’s decision for Brexit.
The countercyclical capital buffer is designed to be lowered in times of economic stress, thus yesterday’s decision to reduce the CCyB is an indicator about the level of UK economic uncertainty post-Brexit.
Whilst an earlier March 2016 announcement by the FCP set to increase the UK’s CCyB to 0.5% of risk weighted assets to be implemented by 29th March next year (2017), the FPC now expects “to maintain a 0% UK CCyB rate until at least June 2017.”
Capital boost for the UK economy
In addition, the FPC made it clear how they wish the freed up capital to be used stating that:
“This action reinforces the FPC’s view that all elements of the substantial capital and liquidity buffers that have been built up by banks are able to be drawn on as necessary to allow them to cushion shocks and maintain the provision of financial services to the real economy, including the supply of credit and support for market functioning.”
FPC, 5th July 2016
As such, lenders will have greater flexibility to immediately maintain their supply of credit to the UK economy.
News & Views on Compliance & Regulation:
Compound Growth can help your firm keep up to date with the latest Regulatory News and Compliance Updates:
Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry or search for a particular topic onsite using our search facility.
News & Views
Read our latest articles, news and views affecting compliance and regulation in the UK Financial Services Industry.
Compliance Support from Compound Growth Ltd
Please contact our Compliance Support Team for a free no obligation discussion of your regulatory requirements and how our regulatory & compliance consultants can help your business move forward compliantly.
Call by Telephone:
(020) 3813 2890
Comment from the Bank of England:
“The FPC has set out its view of the outlook for UK financial stability in the Financial Stability Report today, including its decision to reduce the UK countercyclical capital buffer rate to 0% at this time.”
Bank of England, 5th June 2016
The Countercyclical Capital Buffer Rate:
The Countercyclical Capital Buffer applies to all UK banks, building societies and investment firms that have not otherwise been exempted by the regulator.
This is a variable rate buffer, the total of which is calculated for each firm as a risk weighted average of the countercyclical capital buffer rates that apply in the jurisdictions where the firm’s credit exposures are located.
Additional Information & COREP Support
The new capital buffers affect a firm’s COREP reporting and more information can be found on our dedicated COREP Support site.
