The rule in plain words
COMMON EQUITY TIER 1 CAPITAL is equal to CET1 capital ratio multiplied by c0030 if it is greater than c0010, otherwise c0010 (Total risk exposure amount) shall be used in the calculation in lieu of c0030
In Own funds requirements (CA2) (OF02.00.01.01): if "Total risk exposure amount" in column "Output Floor" (row 0010, column 0030) is more than "Total risk exposure amount" in column "All approaches" (row 0010, column 0010), "Common equity tier 1 capital" in column "Amount" (row 0020, column 0010) in Own funds (CA1) (C01.00.01.01) must equal "Total risk exposure amount" in column "Output Floor" (row 0010, column 0030) multiplied by "CET1 Capital ratio" in column "Amount" (row 0010, column 0010) in Capital adequacy - capital ratios (CA3) (C03.00.01.01); otherwise "Common equity tier 1 capital" in column "Amount" (row 0020, column 0010) in Own funds (CA1) (C01.00.01.01) must equal "Total risk exposure amount" in column "All approaches" (row 0010, column 0010) multiplied by "CET1 Capital ratio" in column "Amount" (row 0010, column 0010) in Capital adequacy - capital ratios (CA3) (C03.00.01.01).
The headline gives only the template and the kind of check, because the rule is too long to say in a headline. The plain words above say all of it.
What to do if your return fails it
- 01Open the tables below and find the cells the rule reads.
- 02The check applies only when its first part holds in your return. When it does, the second part must hold too: fix the second part, or correct the first.
- 03The Bank of England allows a small rounding difference, worked out from the decimals each value is reported with.
- 04It runs only when your filing indicators mark C01.00.01, C03.00.01 and OF02.00.01 as reported.
- 05This is a blocking check. A return that fails it is normally rejected, so fix it before you submit.
The cells it reads
Own funds (CA1) (C01.00.01.01)
Row
- R0020Common equity tier 1 capital
Column
- C0010Amount
Capital adequacy - capital ratios (CA3) (C03.00.01.01)
Row
- R0010CET1 Capital ratio
Column
- C0010Amount
Own funds requirements (CA2) (OF02.00.01.01)
Row
- R0010Total risk exposure amount
Columns
- C0010All approaches
- C0030Output Floor
Which returns it applies to
Line4 Check runs it on the own funds (PRA001) return on Bank of England banking taxonomy 4.1.1. The Bank of England applies it to own funds (PRA001) returns, as a blocking check.
The Bank’s own words and formula
The first paragraph of the plain words above is the Bank of England’s own, word for word, from its list of validations. The second spells out its formula, with each cell named from its templates.
Show the formulaShowHide
The Bank of England's formula. Cells are written as {t: table, r: row, c: column}.
if ({t: OF02.00.01.01, r: 0010, c: 0030} > {t: OF02.00.01.01, r: 0010, c: 0010}) then ({t: C01.00.01.01, r: 0020, c: 0010} = {t: OF02.00.01.01, r: 0010, c: 0030} * {t: C03.00.01.01, r: 0010, c: 0010}) else ({t: C01.00.01.01, r: 0020, c: 0010} = {t: OF02.00.01.01, r: 0010, c: 0010} * {t: C03.00.01.01, r: 0010, c: 0010})Other rules on Own funds requirements (CA2) (OF02.00.01.01)
- This represents the Surplus(+)/Deficit(-) of CET1 capital amount, calculated using as parameters c0010 or c0030 if it’s greater than c0010 (boe_b0788)Blocking
- Own funds requirements (CA2): this is the TIER1 Capital amount calculated by using as parameters c0010 or c0030 if it’s greater than c0010 (boe_b0789)Blocking
- This is the amount of Surplus(+)/Deficit(-) of T1 capital, calculated using as parameters c0010 or c0030 if it’s greater than c0010 (boe_b0790)Blocking
- This is the Own Funds amount calculated by using as variable parameters c0010 or alternatively c0030 if c0030 is greater than c0010 (boe_b0791)Blocking
- Own funds requirements (CA2): a conditional check (boe_b0792)Blocking
- Total credit risk RWAs under standardised approaches should reflect the sum of SA on the SA, and IRB exposures on the SA (boe_b0793)Blocking
- Totals provided in OF 02.01 and OF 02.00 should be consistent (boe_b0720)
- Own funds requirements (CA2): a conditional check (boe_b0718)Blocking
Every PRA banking rule on OF02.00.01.01
Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.