UK FPC consults on increase to O-SII buffer thresholds

The UK Financial Policy Committee (FPC) has published its consultation paper on increasing the current capital buffer thresholds which apply to other systemically important institutions (O-SIIs). The thresholds are part of the FPC's framework for the systemic risk buffer, which requires systemically important banks to hold more capital to absorb stress, and increase the resilience of the UK financial system as a whole. The consultation follows the FPC's review in 2024 which noted the growth in nominal GDP between 2019 and 2023, and that current capital buffer thresholds would need to change to reflect this cumulative growth. Accordingly, the FPC is proposing to increase the current O-SII buffer thresholds by 20% (rounded to the nearest GBP5 million), based on the 20% cumulative growth in nominal GDP between 2019 and 2023. If the FPC confirms these proposals, the UK Prudential Regulation Authority (PRA), which is responsible for issuing O-SII buffer rates, will reissue 2024 O-SII buffer rates based on firms' 2023 leverage exposure measures which will apply from 1 January 2026. The FPC also proposes to assess the thresholds as part of its regular reviews of the framework which take place at least every three years, to avoid significant one-off increases in future. Going forward, it is proposed that future indexation will be communicated through the FPC Record which will then be used by the PRA for setting the new rate. The deadline for comments is 30 May.

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