In April 2015, the Government made secondary legislation giving the Financial Policy Committee (FPC) powers of Direction over leverage ratio requirements and buffers for banks, building societies and Prudential Regulation Authority (PRA)-regulated investment firms. The Government’s decision to legislate followed Recommendations made by the FPC as part of a review of the leverage ratio, requested by the Chancellor in November 2013 [The Chancellor’s letter to the Governor on 26 November 2013.] and published in October 2014 [Bank of England (2014a).].
For any power of Direction given to the FPC, there is a statutory requirement for the FPC to prepare and maintain a general statement of policy. A draft of this Policy Statement was published to assist Parliament’s scrutiny of the draft legislation on the leverage ratio. This Executive Summary provides the rationale for leverage ratio requirements and buffers. This Policy Statement includes material that the FPC is legally required to
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