Prudential Regulation Authority Rulebook

1.1

This Part applies to every firm that is a CRR firm.

1.2

In this Part, the following definitions shall apply:

average exposure measure

means the average exposure measure calculated in accordance with 3.7(1) or 3.8(1), as applicable.

average leverage ratio

means the average leverage ratio calculated in accordance with 3.7(2) or 3.8(2), as applicable.

countercyclical leverage ratio buffer

has the meaning given in Leverage Ratio 1.2.

CRR leverage ratio

means the leverage ratio disclosed by the firm in accordance with Article 451 of the CRR.

leverage ratio

has the meaning given in Leverage Ratio 1.2.

retail deposit

has the meaning given in Leverage Ratio 1.2.

tier 1 capital

has the meaning given in Leverage Ratio 1.2.

total exposure measure

has the meaning given in Leverage Ratio 1.2.

1.3

Unless otherwise defined, any italicised expression used in this Part and in the CRR has the same meaning as in the CRR.

2.1

A firm must disclose in its annual report and accounts among the key indicators their return on assets, calculated as their net profit divided by their total balance sheet.

[Note: Art 90 of the CRD]

3.1

This Chapter applies to:

1. (1) every firm that is a UK bank or a building society that, on the firm’s last accounting reference date, had retail deposits equal to or greater than £50 billion either on:
1. (a) an individual basis;
2. (b) if the firm is a parent institution in a Member State, on the basis of its consolidated situation; or
3. (c) if the firm is controlled by a parent financial holding company in a Member State or by a parent mixed financial holding company in a Member State and the PRA is responsible for supervision of that holding company on a consolidated basis under Article 111 of the CRD, on the basis of the consolidated situation of that holding company; and
2. (2) a ring-fenced body that is a member of a group containing a firm falling within 3.1(1).

3.2

A firm that is:

1. (1) not a member of a consolidation group in relation to which (2) or (3) applies must comply with this Chapter on an individual basis;
2. (2) a parent institution in a Member State must comply with this Chapter on the basis of its consolidated situation;
3. (3) controlled by a parent financial holding company in a Member State or a parent mixed financial holding company in a Member State for which the PRA is responsible for supervision on a consolidated basis under Article 111 of the CRD must comply with this Chapter on the basis of the consolidated situation of that holding company;
4. (4) a ring-fenced body must comply with this Chapter on an RFB sub-consolidated basis whether or not under 3.2(2) or 3.2(3) it also applies to the ring-fenced body on a consolidated basis.

3.3

A firm must disclose each of the following quarterly as at the relevant quarterly end date:

1. (1) leverage ratio;
2. (2) average exposure measure;
3. (3) average leverage ratio; and
4. (4) countercyclical leverage ratio buffer.

3.4

A firm must disclose quarterly such information as is necessary to enable users to understand changes in the firm’s total exposure measure and tier 1 capital over the quarter that have affected the firm’s average leverage ratio.

3.5

Subject to 3.6, a firm must disclose the items specified in 3.3 and 3.4 in the medium or location that the firm considers appropriate.

3.6

When a firm discloses its CRR leverage ratio, the firm must disclose:

1. (1) the items specified in 3.3 and 3.4 as at the same reference date as the firm’s CRR leverage ratio disclosure; and
2. (2) the reasons for any differences between the firm’s leverage ratio and the firm’s CRR leverage ratio as at that reference date,

in the same media or location as the firm discloses its CRR leverage ratio.

3.7

Subject to 3.8:

1. (1) for the purposes of 3.3(2) a firm must calculate its average exposure measure for a quarter as the sum of:
1. (a) the arithmetic mean of the firm’s total exposure measure in relation to on-balance sheet assets on each day in the quarter; and
2. (b) the arithmetic mean of the firm’s total exposure measure excluding on-balance sheet assets on the last day of each month in the quarter; and
2. (2) for the purposes of 3.3(3) and 3.4 a firm must calculate its average leverage ratio for a quarter as its capital measure divided by its exposure measure where the:
1. (a) capital measure is the arithmetic mean of the firm’s tier 1 capital on the last day of each month in the quarter; and
2. (b) exposure measure is the sum of:
1. (i) the arithmetic mean of the firm’s total exposure measure in relation to on-balance sheet assets on each day in the quarter; and
2. (ii) the arithmetic mean of the firm’s total exposure measure excluding on-balance sheet assets on the last day of each month in the quarter.

3.8

For 24 months from the date that this Chapter comes into force, a firm must:

1. (1) for the purposes of 3.3(2), calculate its average exposure measure for a quarter as the arithmetic mean of the firm’s total exposure measure on the last day of each month in the quarter; and
2. (2) for the purposes of 3.3(3) and 3.4, calculate its average leverage ratio for a quarter as its capital measure divided by its exposure measure where the:
1. (a) capital measure is the arithmetic mean of the firm’s tier 1 capital on the last day of each month in the quarter; and
2. (b) exposure measure is the arithmetic mean of the firm’s total exposure measure on the last day of each month in the quarter.