Covered interest arbitrage and PRA buffer: Difference between pages

Revision as of 15:01, 29 October 2016

Capital adequacy - UK.

The PRA buffer is an amount of capital which UK-regulated banks are required to hold, determined following 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 replaced the former 'capital planning buffer'.

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-Simultaneously borrowing and depositing in two different currencies and dealing a forward foreign exchange contract between the same currency pair to cover the related foreign exchange exposure.
+''Capital adequacy - UK''.
+The PRA buffer is an amount of capital which UK-regulated banks are required to hold, determined following 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 replaced the former 'capital planning buffer'.
-Covered interest arbitrage activity normally results in the rapid alignment of the forward foreign exchange rate with the related interest rates, as predicted by Interest rate parity theory.
 == See also ==
-* [[Arbitrage]]
+* [[Buffer]]
-* [[Covered position]]
+* [[Capital adequacy]]
-* [[Interest rate parity]]
+* [[Idiosyncratic stress]]
-* [[Uncovered interest arbitrage]]
+* [[Individual Capital Guidance]]
+* [[Pillar 2]]
+* [[Prudential Regulation Authority]]
+* [[Reverse stress test]]
+* [[Scenario analysis]]
+* [[Shock]]
+* [[Stress]]