UK Prudential Regulation Authority Consults on Restatement of UK Capital Requirements Regulation Rulebook Requirements

The U.K. Prudential Regulation Authority has published a consultation on its proposals to restate, and in some cases modify, the U.K. Capital Requirements Regulation requirements relating to the definition of own funds in its own rulebook. The PRA rules will replace the existing definition of own funds under CRR, which HM Treasury is proposing to revoke under draft legislation published on September 12, 2024 (discussed above).

The PRA proposes to restate in its rules the vast majority of the current U.K. CRR requirements in this area, with some modifications to ensure their operability in the PRA Rulebook, and to omit some provisions that are not necessary or relevant for U.K. firms. The PRA also proposes to make some minor adjustments to enhance the proportionality or transparency of the PRA's approach covering the following elements of the definition of own funds framework: (i) proportionality in the Pre/Post-Issuance Notification regime; (ii) inclusion of interim profits in Common Equity Tier 1 capital resources; (iii) reduction of Additional Tier 1 and Tier 2 instruments; (iv) clarification of the regulatory capital treatment of non-CET1 shares; (v) a requirement for PRA permission for additional forms of capital reduction; and (vi) permitting the terms governing CET1 instruments to reflect the possibility of (but not commit to) a future capital reduction.

The proposals in this consultation would be implemented through: (a) amendments to the Own Funds and Eligible Liabilities (CRR) Part and the Definition of Capital Part of the PRA Rulebook; (b) a draft new statement of policy – The PRA's approach to waivers and permissions under Own Funds (CRR) Part; and (c) amendments to supervisory statement 7/13 – Definition of capital (CRR firms). The PRA intends to consult on the implementation date for these proposals when it consults on restating other CRR provisions in due course. The deadline for responses to the PRA's consultation is December 12, 2024.

Return to main website.