The Association for Financial Markets in Europe (AFME) welcomes the Financial Policy Committee’s update on its review of UK bank capital requirements and plans for reforms.
Jeanie Watson, Director, Capital & Risk Management, said:
“AFME strongly supports the FPC’s review of the UK capital framework and welcomes the commitment from the FPC and PRA to pursue meaningful reform. We encourage international engagement and alignment, but this should not delay measures that can already be taken forward domestically.
AFME welcomes the recognition that changes are required to the leverage ratio framework. The leverage ratio was intended to work as a backstop measure, yet the framework incorporates significant gold-plating and has become increasingly binding. Addressing these issues requires more than incremental adjustment so we are pleased to see that the FPC and PRA will consult on a package of measures and that this incorporates AFME’s recommendation to remove the Countercyclical Leverage Buffer.
We encourage the FPC and PRA to take a holistic approach to reviewing the leverage ratio to deliver meaningful simplification and closer alignment with international standards, while avoiding competitive distortions. Further consideration should also be given to areas where the leverage ratio may be over-calibrated including ensuring that the central bank exemption works for broker dealers based in the UK.
We also welcome the FPC and PRA’s intention to enhance buffer useability and further consideration being given to industry requests for greater clarity on the use of the PRA buffer.
We will review the measures announced today in detail to assess their impact across different business models. Overall, a well-calibrated reform package has the potential to reinforce the UK’s attractiveness for international business, supporting the efficient provision of finance to households and businesses, in line with the UK government’s objectives for economic growth. We look forward to continuing to engage constructively, including through the upcoming consultations announced today.”
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