Prudential Regulation Authority Rulebook

3.1

1. (1) A firm must calculate a countercyclical capital buffer of common equity tier 1 capital equal to its total risk exposure amount multiplied by the weighted average of the countercyclical buffer rates that apply to exposures in the jurisdictions where the firm’s relevant credit exposures are located.

[Note: Art 130(1) (part) of the CRD]

1. (2) In order to calculate the weighted average referred to in (1), a firm must apply to each applicable countercyclical buffer rate its total own funds requirements for credit risk, specific risk, incremental default and migration risk that relates to the relevant credit exposures in the jurisdiction in question, divided by its total own funds requirements for credit risk, specific risk, incremental default and migration risk that relates to all of its relevant credit exposures.
2. (3) For the purposes of (2), a firm must calculate its total own funds requirement for credit risk, specific risk, incremental default and migration risk in accordance with Part Three, Titles II and IV of the CRR.
3. (4) The countercyclical buffer rate for an exposure located in the UK is the rate set by the FPC for the UK.
4. (5) The countercyclical buffer rate for an exposure located in an EEA State other than the UK is:
1. (a) the rate set by the EEA countercyclical buffer authority for that jurisdiction; or
2. (b) if that rate exceeds 2.5% and has not been recognised by the FPC, 2.5%.
5. (6) The countercyclical buffer rate for an exposure located in a third country is the rate set by the FPC for that jurisdiction.
6. (7) If the FPC has not set a rate for a third country, the countercyclical buffer rate for an exposure located in that jurisdiction is:
1. (a) the rate set by the third country countercyclical buffer authority for that jurisdiction; or
2. (b) if that rate exceeds 2.5% and has not been recognised by the FPC, 2.5%.
7. (8) If the FPC has not set a rate for a third country and either there is no third country countercyclical buffer authority for that country or the authority has not set a rate for that jurisdiction, the countercyclical buffer rate for an exposure located in that jurisdiction is zero.
8. (9) If the rate for the UK is increased, that increase takes effect from the date specified by the FPC.
9. (10) If the rate for an EEA State other than the UK is increased, subject to (5)(b) that increase takes effect from:
1. (a) the date specified by the EEA countercyclical buffer authority for that jurisdiction, if the rate applied under this Chapter does not exceed 2.5%;
2. (b) the date specified by the FPC if the rate applied under this Chapter exceeds 2.5%.
10. (11) If the rate for a third country is increased by the FPC, that increase takes effect from the date specified by the FPC.
11. (12) If the FPC does not set a rate for a third country and the rate for that third country is increased by the third country countercyclical buffer authority for that jurisdiction, subject to (7)(b) that increase takes effect from:
1. (a) the date 12 months after the date on which the increase was published by the third country countercyclical buffer authority in accordance with the relevant law the third country, if the rate applied under this Chapter does not exceed 2.5%;
2. (b) the date specified by the FPC if the rate applied under this Chapter exceeds 2.5%.
12. (13) If a rate is reduced, that reduction takes effect immediately.

[Note: Art 140 of the CRD.]

3.2

This rule applies until 31 December 2015

1. (1) A firm must calculate a countercyclical capital buffer of common equity tier 1 capital equal to its total risk exposure amount multiplied by the weighted average of the countercyclical buffer rates that apply in the jurisdictions where the firm’s relevant credit exposures are located.
2. (2) In order to calculate the weighted average referred to in (1), a firm must apply to each applicable countercyclical buffer rate its total own funds requirements for credit risk, specific risk, incremental default and migration risk that relates to the relevant credit exposures in the jurisdiction in question, divided by its total own funds requirements for credit risk that relates to all of its relevant credit exposures.
3. (3) For the purposes of (2), firm must calculate its total own funds requirement for credit risk, specific risk, incremental default and migration risk in accordance with Part Three, Titles II and IV of the CRR.
4. (4) The countercyclical buffer rate for an exposure is the rate recognised or set by the FPC for the jurisdiction in which that exposure is located.
5. (5) If the FPC does not recognise or set a rate for the jurisdiction in which an exposure is located, the countercyclical buffer rate for that exposure is zero.
6. (6) If the rate recognised or set by the FPC for a jurisdiction is increased, that increase takes effect from the date specified by the FPC.
7. (7) If a rate is reduced, that reduction takes effect immediately.

[Note: Art 160(6) (part) of the CRD]