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August 16, 2017

BNM published the Exposure Draft setting out proposals for the leverage ratio framework for banking institutions, which is part of the Basel III regulatory reforms. Under the proposals, banking institutions will be required to comply with a minimum leverage ratio of 3%, effective January 01, 2018. The Draft is applicable to licensed banks, licensed investment banks, and licensed Islamic banks. Responses must be submitted by September 16, 2017.

The leverage ratio is a non-risk based capital measure that is intended to serve as a backstop to the risk-based Capital Adequacy Framework and to restrict the build-up of excessive leverage by banking institutions. In addition to the existing obligations under Basel III Observation Period Reporting (Net Stable Funding Ratio and Leverage Ratio), banking institutions are required to report leverage ratio positions (at the entity, consolidated, and Skim Perbankan Islam levels) as at June 30, 2017, based on the parameters in this Exposure Draft and using the reporting template provided. BNM invites written feedback on the proposed regulatory requirements, including suggestions on areas to be clarified and alternative proposals that it should consider. The written feedback should be constructive and supported with clear rationale, including accompanying evidence, empirical analysis, or illustrations where appropriate. In addition to providing general feedback, banking institutions are requested to respond to specific questions set out throughout this Exposure Draft.

 

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Comment Due Date: September 16, 2017

Keywords: Asia Pacific, Banking, Basel III, Leverage Ratio, BNM

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