PS22/25 – Leverage Ratio: Changes to the retail deposits threshold for application of the requirement
Executive Summary
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 leverage ratio rules during review will cease on 30 June 2026. These changes are implemented via updates to the Leverage Ratio – Capital Requirements and Buffers Part of the PRA Rulebook. #
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
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-compliance risks PRA enforcement, heightened scrutiny, or capital inadequacy findings, but the higher thresh
Who is Affected
Summary
Policy statement 22/25