Financial Policy Committee(Leverage Ratio Framework)

Andrea Leadsom Excerpts

Friday 7th November 2014 Written Statements

[The Economic Secretary to the Treasury (Andrea Leadsom)]

The Government have today published a consultation on granting the independent Financial Policy Committee (FPC) new powers over a leverage ratio framework for UK banks, building societies and investment firms.

On 26 November 2013, the Chancellor wrote to the Governor asking that the FPC undertake a review of the leverage ratio and its role in the regulatory framework. On 11 July 2014, the FPC published a consultation paper setting out its initial proposal for a leverage ratio framework and sought the views of the industry. On 31 October 2014, following almost a year of work and extensive consultation with stakeholders, the FPC published its response, the Review of the Leverage Ratio. The review recommended that the FPC be given new powers of direction over the leverage ratio framework for the UK banking sector. Specifically, the review recommended that the FPC should have a power of direction to set:

The minimum leverage ratio requirement to be set at 3%;

The supplementary leverage ratio buffer rate to be set as a proportion of the systemic

risk-weighted capital buffers using a scaling factor of 35%; and

The countercyclical leverage ratio buffer rate to be set as a proportion of the countercyclical capital buffer rates using a scaling factor of 35%.

In response to this recommendation by the FPC, the Government are consulting on legislating to give the FPC powers of direction over leverage ratio requirements. Currently, the FPC can only make recommendations in relation to these tools.

The consultation that has been published today contains draft secondary legislation that will provide the FPC with the new powers of direction. The Treasury seeks responses to the consultation by 28 November 2014, in advance of laying the secondary legislation before Parliament in early 2015.

The consultation document The Financial Policy Committee leverage ratio framework has been published on the Gov.uk website and found using the following link:

https://www.gov.ukgoverment/consultations/financial-policy-committees-leverage-ratio-framework.