The PRA's PS22/25 finalizes an increase in the retail deposits threshold for the leverage ratio requirement from £50 billion to £75 billion, introducing a three-year averaging mechanism for calculations, effective 1 January 2026. This adjustment reflects nominal UK GDP growth since 2016 to maintain the Financial Policy Committee's original risk appetite while smoothing cliff-edge effects for firms like building societies. It matters for major UK banks and similar firms as it alters capital planning and leverage ratio applicability, potentially reducing immediate compliance burdens for those nearing the old threshold.
#
What Changed
Retail deposits threshold raised from £50 billion to £75 billion, adjusted upward from the CP2/25 proposal of £70 billion to account for further GDP growth to Q2 2025 (rounded to nearest £5 billion).
Introduction of a three-year moving average for calculating retail deposits metric, replacing point-in-time values to mitigate volatility and aid capital planning, particularly for building societies.
Non-UK assets threshold remains unchanged at £10 billion.
Modifications by consent disapplying leve
What You Need To Do
- Review and update internal retail deposits calculations to incorporate three-year moving average methodology starting 1 January 2026
- Assess current and projected retail deposits against £75 billion threshold (and £10 billion non-UK assets) to determine leverage ratio applicability and adjust capital planning accordingly
- Prepare to meet 3
- For firms with modifications by consent
- Update governance, risk models, and board reporting to reflect changes; conduct gap analysis against PRA Rulebook appendices in PS22/25
Key Dates
5 March 2025 - PRA publishes Consultation Paper CP2/25 proposing £70 billion threshold.
5 June 2025 - Consultation response deadline. DEADLINE
12 November 2025 - PRA issues PS22/25 with final policy.
1 January 2026 - Final policy takes effect, applying new £75 billion threshold and three-year averaging.
30 June 2026 - Cessation of modifications by consent disapplying leverage ratio rules.
Compliance Impact
Urgency: High – With effectiveness just after today (1 January 2026), firms near £50-75 billion in retail deposits face immediate recalibration of leverage exposures and capital buffers to avoid breaches, amplified by the shift to averaging which requires historical data reconstruction. Non-complian