Approach to Implementing CRD IV Transitional Provisions – FSA Announcement

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On October 30, the FSA announced its approach to implementing the transitional provisions in the proposed Capital Requirements Directive IV framework (CRD IV). The announcement, published on an FSA webpage, was made in advance of political agreement having been reached on the final CRD IV legislation, highlighting the FSA’s recognition of the importance of these measures to firms’ capital planning.

The FSA confirmed that it expects to exceed the minimum transitional standards relating to the following deductions from Common Equity Tier 1 capital:

  • deductions of interim losses in respect of firms regulated by the new Prudential Regulation Authority;
  • investment in own shares not previously removed to meet accounting standards; and
  • deferred tax assets not arising from timing differences.

A formal consultation on the proposals will be undertaken by the FSA once the final CRD IV legislation has been adopted.