Capital adequacy - UK.
Banks' PRA capital buffers are designed to absorb potential losses under stress.
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.
The amount is determined by the regulator, the Prudential Regulation Authority (PRA), following stress testing and consultation with the regulated bank.
Any PRA buffer which the regulator may set is additional to Individual Capital Guidance (ICG).
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'.