UK Banks Equity and UK Rates Strategy: UK Leverage Ratio Review

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UK Banks Equity and UK Rates Strategy: UK Leverage Ratio Review

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June 8, 2026 03:30 AM GMT

Morgan Stanley Europe S.E., Madrid Branch+MUK Banks Equity and UK Rates Strategy | Europe Alvaro Serrano

Equity Analyst

UK Leverage Ratio Review Alvaro.Serrano@morganstanley.comMorgan Stanley & Co. International plc+ +44 20 7425-6942

Almario Sulaj

With the July Financial Stability Report, the FPC is expected to ResearchAlmario.Sulaj@morganstanley.comAssociate +44 20 7425-2049

give an update on capital requirements. We believe an Fabio Bassanin, CFA

adjustment to the leverage ratio is possible, which would Strategist

Fabio.Bassanin@morganstanley.com +44 20 7425-1869

increase capacity to buy gilts, but with the CCyB at 2%, we see Luca Salford

limited room for CET1 levels to come down short term. StrategistLuca.Salford@morganstanley.com +44 20 7677-1337

We expect the FPC to reduce the leverage ratio requirements… In December the Banks

Financial Policy Committee (FPC) stated it judged UK banks could run with 100bp Europe

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lower capital and that it would review the leverage ratio as it was becoming an

unintended binding constraint for 3 out of the top 7 UK banks. We expect the

outcome of the review to be published with the FSR on July 7th, and the leverage

ratio to be aligned with EU standards. This will add to the Ring-Fenced bank review

proposals from the Treasury, which we also believe is incrementally positive for

profitability.

Aligning the definition to the EU would free up c. £250bn of leverage capacity.

The Prudential Regulation Authority (PRA) has made it clear it is firmly against

removing gilts from the calculation, and we believe the more likely outcome is that

the countercyclical buffer (CCyB) is removed from the ratio as it is largely the