Required Level of Own Funds (CRR)

1.

An institution shall at all times satisfy the following own funds requirements:

1. (a) a Common Equity Tier 1 capital ratio of 4.5%;
2. (b) a Tier 1 capital ratio of 6%;
3. (c) a total capital ratio of 8%.

2.

An institution shall calculate its capital ratios as follows:

1. (a) the Common Equity Tier 1 capital ratio is the Common Equity Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;
2. (b) the Tier 1 capital ratio is the Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;
3. (c) the total capital ratio is the own funds of the institution expressed as a percentage of the total risk exposure amount.

2A.

Subject to paragraph 5, the total risk exposure amount shall be calculated as follows:

1. (a) for the purposes of complying with the obligations of this Part: 
   1. (i) on an individual basis, a stand-alone institution in the UK and a ring-fenced body that is not a member of a sub-consolidation group; 
   2. (ii) on a sub-consolidated basis, a ring-fenced body that is a member of a sub-consolidation group; and 
   3. (iii) on a consolidated basis, a CRR consolidation entity that is not an international subsidiary, 
2. shall calculate the total risk exposure amount as follows:

1. TREA = max {U-TREA; x · S-TREA + OF-ADJ}

where:

Output Floor Adjustments 

IRB Adjustments

Components of Net SA GP Adjustment (up to cap)

1. (b) for the purposes of complying with the obligations of this Part on a sub-consolidated basis, the total risk exposure amount of an institution other than a ring-fenced body shall be the un-floored total risk exposure amount calculated in accordance with paragraph 3;
2. (c) for the purposes of complying with the obligations of this Part on an individual basis, the total risk exposure amount of a ring-fenced body that is a member of a sub-consolidation group and an institution which is not a stand-alone institution in the UK shall be the un-floored total risk exposure amount calculated in accordance with paragraph 3;
3. (d) for the purposes of complying with the obligations of this Part on a consolidated basis, the total risk exposure amount of a CRR consolidation entity that is an international subsidiary shall be the un-floored total risk exposure amount calculated in accordance with paragraph 3.

3.

The un-floored total risk exposure amount shall be calculated as the sum of points (a) to (f) of this paragraph after having taken into account paragraphs 4 and 4A:

1. (a) the risk-weighted exposure amounts for credit risk and dilution risk, calculated in accordance with Title II of Part Three of CRR, the credit risk rules, the Counterparty Credit Risk (CRR) Part and Settlement Risk (CRR) Part Article 379 in respect of all the business activities of an institution, excluding risk-weighted exposure amounts arising from the trading book business of the institution;
2. (b) the own funds requirements for the trading book business of an institution for the following:
   1. (i) market risk as calculated in accordance with the market risk rules;
   2. (ii) large exposures exceeding the limits specified in Large Exposures (CRR) Part Articles 395 to 401, to the extent that an institution is permitted to exceed those limits, as calculated in accordance with the Large Exposures (CRR) Part;
3. (c) the own funds requirements for market risk as calculated in accordance with the market risk rules for all business activities that are subject to foreign exchange risk or commodity risk;
4. (ca) the own funds requirements for settlement risk calculated in accordance with Settlement Risk (CRR) Part Articles 378 and 380;
5. (d) the own funds requirements calculated in accordance with the Credit Valuation Adjustment Risk Part;
6. (e) the own funds requirements calculated in accordance with the Operational Risk Part;
7. (f) the risk-weighted exposure amounts calculated in accordance with Title II of Part Three of CRR, the credit risk rules and the Counterparty Credit Risk (CRR) Part for counterparty credit risk arising from the trading book business of the institution for the following types of transactions and agreements:
   1. (i) contracts listed in and Annex 1 of Chapter 3 of the Counterparty Credit Risk (CRR) Part and credit derivatives;
   2. (ii) repurchase transactions, securities or commodities lending or borrowing transactions based on securities or commodities;
   3. (iii) margin lending transactions based on securities or commodities;
   4. (iv) long settlement transactions.

3A.

The standardised total risk exposure amount shall be calculated as the sum of points (a) to (f) of paragraph 3:

1. (a) after having taken into account paragraphs 4 and 4A; and
2. (b) calculated without using any of the following approaches or as if permission to use the following approaches has not been granted:
   1. (i) the SFT VaR Method;
   2. (ii) the IRB Approach provided for in the Credit Risk: Internal Ratings Based Approach (CRR) Part except that, where permission to use the Internal Ratings Based Approach has been given, exposures for which a credit assessment by a nominated ECAI is not available and are not covered by paragraph 11 of Credit Risk: Standardised Approach (CRR) Part Article 122 may be assigned the risk weights set out in points (a) or (b), as applicable, of paragraph 8 of Credit Risk: Standardised Approach (CRR) Part Article 122;
   3. (iii) the Securitisation Internal Ratings Based Approach set out in Securitisation (CRR) Part Articles 258 to 260A and the Internal Assessment Approach set out in Securitisation (CRR) Part Article 265;
   4. (iv) the Internal Model Method set out in Section 6 of  Chapter 3 of the Counterparty Credit Risk (CRR) Part;
   5. (v) the internal model approaches set out in Market Risk: Internal Model Approach (CRR) Part 1.1 or 4.2.

4.

The following provisions shall apply to the calculations of the total un-floored risk exposure amount referred to in paragraph 3 and of the standardised risk exposure amount referred to in paragraph 3A:

1. (a) the own funds requirements referred to in points (c), (ca), (d) and (e) of paragraph 3 shall include those arising from all the business activities of an institution;
2. (b) an institution shall multiply the own funds requirements set out in points (b) to (e) of paragraph 3 by 12.5.

4A.

Where an institution is an SDDT or SDDT consolidation entity, paragraph 3 applies subject to the following modifications:

1. (a) for the purpose of points (a) and (f) of paragraph 3:
   1. (i) subject to points (iii) to (v), SDDTs and SDDT consolidation entities shall not calculate risk-weighted exposure amounts in respect of contracts listed in Annex 1 of Chapter 3 of the Counterparty Credit Risk (CRR) Part;
   2. (ii) subject to points (iii) to (v), SDDTs and SDDT consolidation entities shall not calculate risk-weighted exposure amounts in respect of credit derivatives where doing so would require the exposure value to be calculated in accordance with one of the methods set out in Sections 3, 4 and 5 of the Counterparty Credit Risk (CRR) Part;
   3. (iii) where an SDDT is a clearing member of a central counterparty, the SDDT shall calculate risk-weighted exposure amounts in respect of its trade exposures with the central counterparty and its exposures arising from its contributions to the default fund of the central counterparty;
   4. (iv) where a member of its consolidation group is a clearing member of the central counterparty, an SDDT consolidation entity shall, when complying with this Part on the basis of its consolidated situation, calculate risk-weighted exposure amounts in respect of trade exposures of the clearing member with the central counterparty and exposures arising from contributions of the clearing member to the default fund of the central counterparty;
   5. (v) this point (a) does not affect any requirement to calculate risk-weighted exposure amounts in respect of securitisation positions that result from derivative instruments listed in Annex 1 of Chapter 3 of the Counterparty Credit Risk (CRR) Part;
2. (b) by way of derogation from point (b) of paragraph 3, institutions that are SDDTs or SDDT consolidation entities must calculate the own funds requirement for their trading book business in accordance with paragraph 2A of Article 94 of the Trading Book (CRR) Part; and
3. (c) points (c) and (d) of paragraph 3 do not apply to an SDDT or an SDDT consolidation entity.

5.

When calculating TREA for the purposes of paragraph 2A(a), an institution or CRR consolidation entity may apply the following factor x during the periods specified below:

1. (a) 60% during the period from 1 January 2027 to 31 December 2027;
2. (b) 65% during the period from 1 January 2028 to 31 December 2028;
3. (c) 70% during the period from 1 January 2029 to 31 December 2029.

[Note: This rule corresponds to Article 92 of CRR as it applied immediately before revocation by the Treasury]