UK Finance responds to CP 14/21 Changes to the UK leverage ratio framework

UK Finance has provided a detailed response to CP14/21. At a high level, we broadly support the intentions of the FPC and PRA's proposals which are to update the UK's leverage ratio regime to reflect further international developments. This will ensure the UK's regime is aligned with international standards. Our members fully support a harmonised, proportionate approach, to the implementation of internationally agreed standards.

We also recognise the benefits to financial stability of ensuring that all banks and building societies are subject to similar prudential standards and welcome the expansion of the scope of the leverage ratio regime to non-systemic firms as a supervisory expectation, rather than a hard requirement, as this formulation avoids consequent knock-on impacts on MREL requirements.

We note however that the application of the leverage ratio requirement to firms without retail deposits will subject them to a higher requirement, potentially distorting competition between the largest banks depending on their funding model. We recommend that firms are able to opt out of the Central Bank claim exemption enabling them to remain on the 3% leverage ratio requirement.

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