PRA CEO, Sam Woods, delivered a speech at City Week 2022 in which he set out “a radical, alternative approach” to bank capital requirements.
The proposed approach would involve:
- a single capital buffer calibrated to reflect both micro-prudential and macro-prudential risks;
- a low minimum capital requirement to maximise the size of the buffer;
- a “ladder of intervention” based on judgement for firms who enter their buffer;
- all requirements being met with common equity; and
- a mix of risk-weighted and leverage-based requirements.
Mr Woods suggested that such approach would only be successful if it is based on strong, common international standards.