CP13/6 - CRD IV for Investment Firms - Financial Conduct Authority

CP13/6
CRD IV for Investment Firms
3.9 There are also two national discretions whereby a designated UK authority may grant an
exemption to (some or all) Small and Medium Sized Enterprises (SMEs) from the CCoB and/
or the CCyB, on the basis that the firms concerned do not pose a risk to the financial stability
of the UK. The Treasury has not yet proposed which UK authority or authorities would be
designated with the power to determine these two exemptions. However, if the FCA was to
be made the designated authority then based on our analysis on the definition of significance
(see Chapter 5), we would be minded to propose that we exercise these discretions. Whereas,
if the FCA is not the designated authority for these two discretions, then we would propose to
make our views known to the relevant body that is.
3.10 The CCoB rate is fixed. It will eventually be 2.5% multiplied by total risk exposures (see CRR
article 92(3)), subject to a five year transition period shown below:
Table 5: Minimum CCoB rate during five year transition timetable
Year 2014 2015 2016 2017 2018 2019
Rate 0% 0% 0.625% 1.25% 1.875% 2.5%
3.11 There is a further national discretion that provides the Member State with the ability to
accelerate the five year transitional timetable. The Treasury has yet to determine who will make
the decision on this discretion. If the FCA is able to make the decision for the investment firms
it prudentially regulates, then we would be minded not to propose accelerating the five year
transition timetable (especially in light of the requirement on the EU Commission to review
what is an appropriate prudential regime for all investment sector firms by end 2015).
3.12 The CCyB is set by a UK designated authority to be determined by the Treasury; this is likely
to be the macro-prudential authority (i.e. the Bank of England (Bank) or the Financial Policy
Committee of the Bank (FPC)). The CCyB captures excess credit growth and is calibrated using
measures such as the deviation from long term trends in the ratio of credit to GDP and other
relevant factors for addressing cyclical systemic risk.
3.13 The CCyB rate may be set up to 2.5%, in 0.25% increments, with the right in certain circumstances
to exceed 2.5%. The European Systemic Risk Board (ESRB) may issue further guidance on the
setting of countercyclical buffers. Only once the Treasury has confirmed arrangements for the
UK macro-prudential authority designated with the responsibility for setting a CCyB rate for
the UK will requirements for this buffer be clearer, including the national discretion to allow
the maximum rate (see table 6 below) to be exceeded during the transitional period to 2019:
Table 6: Maximum CCyB rate during five year transition timetable
Year 2014 2015 2016 2017 2018 2019
Rate 0% 0% 0.625% 1.25% 1.875% 2.5%
Q3: Do you agree with our initial view that, if possible and
depending upon the decisions of the Treasury regarding
the designated authorities, the discretions to exempt
SME investment firms from the capital conservation
buffer and the countercyclical buffer should be
exercised? If not, please explain why not.
22 July 2013
Financial Conduct Authority