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

CRD IV for Investment Firms
CP13/6
3.25 Therefore, firms should maintain their existing CPB, which (to the extent it is held in CET 1) can
be used to meet the CCoB or CCyB. It would not be prudent to ‘release’ CPB amounts until the
precise details and impact of the new capital buffers regime is known (especially if firms were
then required to re-capitalise such amounts once CRD IV is fully implemented). Firms should
plan both for any absolute increases in own funds as a consequence of the new capital buffer
regime as well as changes in the mix of own funds in particular where the quality of capital is
being increased (i.e. capital buffers must be held in CET 1).
3.26 In due course we will provide further details, and consult as necessary, on our future policy for
the current CPB in the light of the new buffer regime in the Directive. We are mindful of the
potential risk of double counting should the CPB and the new capital buffers cover the same
risk with the same quality of capital. This will be given due consideration as part of our further
work including during the transitional period.
Q7: Until such point as we are able to consult further on
our future policy, do you agree that the CPB should be
maintained and added to the Pillar 2A charge to the extent
that there is no identifiable double counting? If not,
please explain why not including alternative transition
approaches and the rationale for those approaches.
Recovery and resolution plans
3.27 Article 74(4) of the Directive sets out the requirements in relation to recovery and resolution
plans as follows:
• Firms must prepare, maintain and update recovery plans for the restoration of their financial
situation following a significant deterioration; and
• Firms must cooperate closely with the resolution authorities providing them with all the
necessary information, so the resolution authorities can prepare and draft the resolution
plans setting out options for the orderly resolution of the firms in the case of failure.
3.28 The extent of the requirements may be reduced by the CA if, after consulting the national
macro-prudential authority, it considers that the failure of a specific institution ‘due to its size,
to its business model, to its interconnectedness to other institutions, or to the financial system
in general, will not have a negative effect on financial markets, on other institutions or on
funding conditions’. We are minded to apply this discretion based on proportionality, but we
are not consulting on this item at this stage since we need to work further with the macroprudential
authority on a suitable and consistent approach.
Stress testing
3.29 Article 100 of the Directive includes a requirement to carry out stress tests at least annually to
facilitate the review and evaluation process under Article 97. It is expected that the EBA will
issue guidelines in this area setting up common methodologies to be used when conducting
annual supervisory stress tests.
Financial Conduct Authority July 2013
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