ECB Extends Leverage Ratio Relief for Banks Until March 2022
ECB Banking Supervision announced that euro area banks it directly supervises may continue to exclude certain central bank exposures from the leverage ratio until March 2022. Such exposures include coins, banknotes, and deposits held at the central bank. ECB has decided to extend the temporary exclusion of these central bank exposures from the total exposure measure as exceptional macroeconomic circumstances due to the COVID-19 pandemic continue. This decision repeals the earlier Decision 2020/1306 on leverage ratio relief, with effect from June 28, 2021. ECB also updated the frequently asked questions (FAQs) on supervisory measures in response to the COVID-19 pandemic.
The Capital Requirement Regulation (CRR) allows banking supervisors, after consulting the relevant central bank, to allow banks to exclude central bank exposures from their leverage ratio. ECB mentioned that the 3% leverage ratio requirement will become binding on June 28, 2021. Banks that decide to exclude central bank exposures must recalibrate this 3% leverage ratio requirement in such a way that only the central bank exposures newly accumulated since the beginning of the pandemic effectively benefit from the leverage ratio relief. This means that only the increase in banks' central bank exposures since end of 2019 would in practice lead to leverage ratio relief; this maintains the level of resilience provided by the leverage ratio before the pandemic.
Based on the end of December 2020 data of the 39 significant banks already excluding central bank exposures from their leverage ratio, the measure to continue to exclude certain central bank exposures from the leverage ratio would increase headroom over leverage ratio requirement on average by 0.5 percentage point (about EUR 70 billion Tier 1 capital). This is the result of two effects in opposite directions: a continued 0.7 percentage point increase of the leverage ratio due to the exclusion of central bank exposures, partially offset by a 0.2 percentage point increase of the 3% leverage ratio requirement due to the recalibration. Banks that elect to use this extension should nevertheless plan to timely maintain sufficient capital in view of the expiration of the prudential exemption.
This decision by ECB Banking Supervision came after the Governing Council of ECB confirmed that exceptional circumstances due to the COVID-19 pandemic continue. The Governing Council of ECB believes that the condition of exceptional circumstances warranting this temporary exclusion from the calculation of banks’ total exposure measure continues to be met for the euro area as a whole. The Governing Council concurs that, on a quarterly basis, the date on which the exceptional circumstances are deemed to have started is December 31, 2019.
Related Links
- Press Release on Leverage Ratio Relief
- Decision on Leverage Ratio Relief (PDF)
- Press Release on Exceptional Circumstances
- FAQs
Keywords: Europe, EU, Banking, COVID-19, Leverage Ratio, Basel, CRR, Regulatory Capital, ECB
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.

Patrycja Oleksza
Applies proficiency and knowledge to regulatory capital and reporting analysis and coordinates business and product strategies in the banking technology area
Previous Article
BSP Establishes Guidelines on Open Finance FrameworkRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.