Buffers

And following hard on the heels of CP09/29 we have CP09/30 – “Capital Planning Buffers” – which is mercifully 300 pages or so shorter. A ‘capital planning buffer’ relates to the ICAAP requirements set out in BIPRU 2.2 and is the amount and quality of capital resources that a firm should hold at a given time, so that it is available to absorb losses and meet higher capital requirements in adverse external circumstances such as an economic downturn – although see the CP for the full definition.

The FSA stress that this is not a new regulatory requirements but rather a clarification. It is noted from the Overview that the FSA is applying proportionality to this and so small firms may not be set capital buffers and indeed if you look at the proposed changes to the handbook it is very much based upon the SREP process in which the FSA reviews an ICAAP and sets Individual Capital Guidance.

The proposed changes to BIPRU 2.2 (which are all in the form of Guidance rather than Rules) can be reviewed in Appendix 1 of the CP.

The consultation period ends 31 March 2010 with a Policy Statement planned for Q3 2010.