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 and published in October 2014 [Bank of England (2014a).].
The FPC is required to produce and maintain a Policy Statement for its powers of Direction, setting out publicly the general policy that the FPC expects to follow in using its powers of Direction.
This Policy Statement is structured as follows. Section 2 describes the proposed leverage ratio requirements and buffers, including their scope of application, how they fit with the existing regulatory framework and how decisions to apply them would be communicated and enforced. It also explains the FPC’s
…