UK Finance has responded to the PRA's consultation paper CP 2/20. The planned one per cent reduction in Pillar 2A capital requirements it proposes reflects the prudential regulator's objective of keeping the amount of capital in the banking system broadly constant, following the FPC's decision in December to increase the 'standard risk? Counter Cyclical Buffer (CCyB) from one per cent to two per cent. The CCyB was subsequently reduced to zero in the light of the possibly profound impacts of the current Covid-19 pandemic, which UK Finance fully supports.

We are concerned however that not all firms, for instance those with simpler business models or those that are leverage ratio constrained, will benefit from the proposed reduction in full.

Recognising that the CCyB will not be increased before March 2020 UK Finance looks forward to working with the PRA in the coming months to ensure that all its members subject to the CCyB will receive the full Pillar 2A reduction.