It said the changes will affect banks, building societies and the investment firms regulated by the PRA, but will not affect insurance firms.
The EU’s Capital Requirement’s Directive (CRD IV) is the package of rules which implements Basel III, the international regulatory framework for banks.
The PRA said it has already taken decisive action to ensure the capital of major UK banks and building societies reflect expected future losses.
In the consultation the main change is a greater focus on the highest quality of capital, known as core equity tier one, but the overall ratio of capital will stay much the same.
Effect on banks
Barclays announced earlier this week intentions for a £5.8bn rights issue to shore up its capital ratios, citing the PRA’s expectations as the reason behind it.
Justin Cooper, CEO of Capita Registrars said: “Barclays is between a rock and a hard place. The health of the banking sector matters to investors. It now makes up £1 in every £11 of all dividends paid by UK companies, less than half the pre-crisis levels.
“The regulator’s demand to hold large amounts of capital is one of the main reasons for the sharp decline. The regulator’s insistence that Barclays raise another £12.8bn in capital is a big blow. Half of this will come through a hugely dilutive rights issue.”
The PRA said the UK capital regime for the banking sector and investment firms will remain broadly the same under CRD IV but there are a number of important changes which will affect UK firms.
Andrew Bailey, deputy governor prudential regulation, Bank of England and CEO of the PRA, said: “Well capitalised and resilient firms are crucial for ensuring financial stability and supporting UK growth. The PRA has already acted to increase both the amount and quality of capital held by firms, reflecting our determination to improve the stability of UK firms after the crisis.”
