PRA buffer
Capital adequacy - UK.
The PRA buffer is an amount of capital which UK-regulated banks are required to hold, decided as a consequence of stress testing.
The amount is determined by the UK regulator, the Prudential Regulation Authority (PRA), following consultation with the regulated bank.
Any PRA buffer which the regulator may set is additional to Individual Capital Guidance (ICG).
The PRA buffer is designed to be adequate to absorb losses that may arise under a 'severe, but plausible' stress, in line with the CRD IV rules.
In addition, where the PRA assesses a firm’s risk management and governance to be significantly weak, it may also set the PRA buffer to cover the risk posed by those weaknesses until they are addressed.
The PRA buffer is sometimes known as the 'Pillar 2B' buffer.
The PRA buffer replaced the former 'capital planning buffer'.
