BCBS Consults on Disclosure Rules for Leverage Ratio Window-Dressing
BCBS published a consultative document on revisions to the leverage ratio disclosure requirements to address the leverage ratio window-dressing behavior. BCBS seeks the views of stakeholders on revisions to leverage ratio Pillar 3 disclosure requirements to include, in addition to the current requirements, disclosures of the leverage ratio exposure measure amounts of securities financing transactions, derivatives replacement cost, and central bank reserves calculated using daily averages over the reporting quarter. Comment period on the consultation ends on March 13, 2019.
Heightened volatility in various segments of money markets and derivatives markets around key reference dates (for example, quarter-end dates) has alerted the Basel Committee to potential regulatory arbitrage by banks. A particular concern is "window-dressing," in the form of temporary reductions of transaction volumes in key financial markets around reference dates, resulting in the reporting and public disclosure of elevated leverage ratios. In this regard, BCBS had published a statement in October 2018, in which it indicated that window-dressing by banks is unacceptable, as it undermines the intended policy objectives of the leverage ratio requirement and risks disrupting the operations of financial markets. BCBS proposes that the potential revisions to Pillar 3 disclosure requirements set out in this consultative document be implemented no later than January 01, 2022 and apply to all internationally active banks.
Although the scope of this consultative document is limited to the disclosure of a limited set of exposures, BCBS will continue to monitor trends in banks’ leverage ratio exposures and may consider extending the scope of disclosure requirements based on averages, if warranted to address potential window-dressing behavior identified for other types of exposures. The Committee will also continue to consider whether amendments to leverage ratio Pillar 1 calculation requirements would be appropriate to mitigate window-dressing behavior. The Basel III leverage ratio standard comprises a 3% minimum level that banks must meet at all times, a buffer for global systemically important banks (G-SIBs), and a set of public disclosure requirements. For the purpose of disclosure requirements, banks must report the leverage ratio on a quarter-end basis or, subject to approval by national supervisors, report a measure based on averaging (for example, using an average of exposure amounts based on daily or month-end values).
Related Links
- Press Release
- Consultation on Leverage Ratio Requirements (PDF)
- Statement on Leverage Ratio Window-Dressing
Comment Due Date: March 13, 2019
Keywords: International, Banking, Leverage Ratio, Window Dressing Behavior, Basel III, Disclosures, Pillar 3, BCBS
Previous Article
EBA Consults on Guidelines on ICT and Security Risk ManagementRelated Insights
|
News
EBA Single Rulebook Q&A: Second Update for January 2019EBA published answers to eight questions under the Single Rulebook question and answer (Q&A) updates for this week.
January 18, 2019
WebPage
Regulatory News
|
|
News
BCBS Finds Liquidity Risk Management Principles Remain Fit for PurposeBCBS completed a review of its 2008 Principles for sound liquidity risk management and supervision. The review confirmed that the principles remain fit for purpose.
January 17, 2019
WebPage
Regulatory News
|
|
News
MAS Guidelines on Risk Mitigation Requirements for OTC DerivativesMAS published guidelines on risk mitigation requirements for non-centrally cleared over-the-counter (OTC) derivatives contracts.
January 17, 2019
WebPage
Regulatory News
|
|
News
HKMA Urges Local Banks to Start Working on FRTB ImplementationHKMA announced that it plans to issue a consultation paper on the new market risk standard in the second quarter of 2019.
January 17, 2019
WebPage
Regulatory News
|
|
News
EBA Finalizes Guidelines for High-Risk Exposures Under CRREBA published the final guidelines on the specification of types of exposures to be associated with high risk under the Capital Requirements Regulation (CRR). The guidelines are intended to facilitate a higher degree of comparability in terms of the current practices in identifying high-risk exposures.
January 17, 2019
WebPage
Regulatory News
|
|
News
BoE Publishes the Schedule for Statistical Reporting for 2019BoE published the updated schedule for statistical reporting for 2019. The reporting institutions use the online statistical data application (OSCA) to submit statistical data to BoE.
January 16, 2019
WebPage
Regulatory News
|
|
News
PRA Delays Final Direction on Reporting of Private SecuritizationsPRA and FCA have delayed the issuance of final direction, including the final template, on reporting of private securitizations, from January 15, 2019 to the end of January 2019.
January 15, 2019
WebPage
Regulatory News
|
|
News
SNB Updates Forms on Supervisory Reporting for BanksSNB published Version 1.7 of reporting forms (AUR_U, AUR_UEA, AUR_UES, AURH_U, AUR_K, AUR_KEA, and AURH_K) and the related documentation for supervisory reporting on an individual and consolidated basis.
January 15, 2019
WebPage
Regulatory News
|
|
News
BCBS Finalizes Market Risk Capital Framework and Work Program for 2019BCBS published the final framework for market risk capital requirements and its work program for 2019. Also published was an explanatory note to provide a non-technical description of the overall market risk framework, the changes that have been incorporated into in this version of the framework and impact of the framework.
January 14, 2019
WebPage
Regulatory News
|
|
News
EBA Single Rulebook Q&A: First Update for January 2019EBA published answers to 13 questions under the Single Rulebook question and answer (Q&A) updates for this week.
January 11, 2019
WebPage
Regulatory News
|
