UK Banks: Leverage ratio changes and guilty pleasures: What the FPC’s changes mean for bank capital

Research evidence excerpt

UK Banks: Leverage ratio changes and guilty pleasures: What the FPC’s changes mean for bank capital

Global Research

9 July 2026ab

UK Banks Equities

United KingdomLeverage ratio changes and gilty pleasures: What

the FPC's changes mean for bank capital Banks

Jason Napier, CFA

Analyst

jason.napier@ubs.com

A more effective leverage ratio framework? +44-20-7568 5037

This week the UK Financial Policy Committee (FPC) announced changes to the leverage Sanjena Dadawala

ratio bank capital framework to make it 'simpler, more effective, more proportionate Analyst

and better calibrated to the risks in today’s financial system' and to 'strengthen the sanjena.dadawala@ubs.com

releasability and usability of buffers'. The FPC expects the measures to make it easier for +44-20-7567 0753

banks to use capital to support lending and follows the FPC's assessment of UK bank

capital requirements published in Dec'25 which reduced system-wide Tier 1 capital

requirements to 13% of risk weighted assets (from 14%), consistent with a CET1 ratio

of ~11%. The leverage ratio - the focus of this week's announcement - measures bank

capital vs an adjusted gross asset / exposure metric, a post-GFC complement to the

CET1/ risk-weighted requirement.

What's changed: A 20bps lower average lev ratio requirement, simpler calcs

Existing UK leverage ratio requirements are: i) 3.25% of UK leverage exposure (which

excludes central bank reserves), plus ii) a systemic buffer (additional leverage ratio buffer

or ALRB) for globally systemic banks (G-SIBs) and other systemically important

institutions (O-SIIs), and iii) a countercyclical leverage buffer (CCLB), with the (ii) and (iii)

demand set at 35% of the equivalent RWA-based CET1 buffers. The FPC's review found