Company: LLOBF
Filing Date: 2025-02-25
Form Type: 424B2
Source: 0000950103-25-002401
Chunk: 39

Company: Lloyds Banking Group plc
Filing Date: 2025-02-25
Form: 424B2
Chunk 39
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ing countercyclical capital buffer (“CCyB”) (which will vary over time depending on the
effective rates set by regulators in countries where we have relevant credit exposures) and (iii) the O-SII (as defined below) buffer
broadly constitute the “combined buffer” requirement in relation to the Group.

The CCB is a standard buffer of 2.5% of risk-weighted
assets designed to provide for losses in the event of stress. The CCyB is time varying; the amount of the buffer is determined by LBG
as the weighted average of the buffer rates in effect as set by the Financial Policy Committee of the Bank of England (“FPC”)
in respect of the relevant U.K. credit risk exposures, and the relevant regulators in the jurisdictions where the Group has relevant credit
risk exposures. The CCyB for the U.K. is currently set at 2%. The FPC reviews this rate quarterly in light of the evolution of the overall
risk environment and may elect to increase or decrease this rate at any time. Generally, any increase in the CCyB rate will take effect
one year after the decision to increase it, in order to give institutions time to raise the necessary additional capital if required.
However, in some cases the FPC may need to build the CCyB at a faster rate to reach the necessary level of resilience. This could include
a need to build capital at a faster rate than we can meet through retaining earnings. A decrease may take effect immediately.

Although the Group is not currently classified
as a global systemically important institution (“G-SII”), it has been classified as an ‘other’ systemically
important institution (“O-SII”) by the PRA. The FPC is responsible for maintaining a framework for setting O-SII buffer
rates (which are up to a maximum of 3%) that reflects the extent to which the failure or distress of a ring-fenced bank or large building
society might pose a risk to the U.K. financial system. The PRA is responsible for applying the framework set by the FPC and has indicated
that it would keep the policy under review to assess whether any changes would be required due to changes in the U.K. regulatory framework.

While the O-SII buffer applies to the ring-fenced
bank sub-group within the Group, the PRA has included in the Group’s PRA buffer (as defined below) an amount equivalent to the O-SII
buffer;