IFPRU 10.3 Countercyclical capital buffer

Main requirement

IFPRU 10.3.1 R RP

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'srelevant credit exposures are located.

[Note: article 130(1) (part) of CRD]

Calculation of countercyclical capital buffer rates

IFPRU 10.3.2 R RP
  1. (1)

    To calculate the weighted average in IFPRU 10.3.1 R, 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.

  2. (2)

    For the purposes of (1), 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 (Capital requirements for credit risk) and IV (Own funds requirements for market risk) of the EU CRR.

  3. (3)

    The countercyclical buffer rate for an exposure located in the UK is the rate set by the UK countercyclical buffer authority for the UK.

  4. (4)

    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% of total risk exposure amount and has not been recognised by the UK countercyclical buffer authority, 2.5%

  5. (5)

    The countercyclical buffer rate for an exposure located in a third country is the rate set by the UK countercyclical buffer authority for that jurisdiction.

  6. (6)

    If the UK countercyclical buffer authority 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 UK countercyclical buffer authority, 2.5%.

  7. (7)

    If the UK countercyclical buffer authority 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. (8)

    If the countercyclical buffer rate for the UK is increased, that increase takes effect from the date specified by the UK countercyclical buffer authority.

  9. (9)

    If the countercyclical buffer rate for an EEA State other than the UK is increased, subject to (4)(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%; or

    2. (b)

      the date specified by the UK countercyclical buffer authority if the rate applied under this chapter exceeds 2.5%.

  10. (10)

    If the countercyclical buffer rate for a third country is increased by the UK countercyclical buffer authority, that increase takes effect from the date specified by the UK countercyclical buffer authority.

  11. (11)

    If the UK countercyclical buffer authority does not set a countercyclical buffer rate for a third country and that rate is increased by the third-country countercyclical buffer authority for that jurisdiction, subject to 6(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 of the third country, if the rate applied under this chapter does not exceed 2.5%; or

    2. (b)

      the date specified by the UK countercyclical buffer authority if the rate applied under this chapter exceeds 2.5%.

  12. (12)

    If a countercyclical buffer rate is reduced, that reduction takes effect immediately.

[Note: articles 136(4) (part) , 139(2) to (5) (part) and 140(1) to (4) and (6) (part) of CRD]

Location of exposures

IFPRU 10.3.3 G RP

A firm must identify the geographical location of a relevant credit exposure in accordance with the regulatory technical standards adopted under article 140(7) of CRD.

[Note: article 140(5) of CRD]