Featured Product

    BCBS Finalizes Certain Revisions to the Leverage Ratio Standard

    June 26, 2019

    BCBS revised the leverage ratio disclosure requirements and the treatment of client cleared derivatives for calculating leverage ratio. Revisions to the disclosure requirements are intended to reduce excessive volatility in bank exposures around key reference dates. Both revisions will be applicable to the version of the leverage ratio standard that will come into effect on January 01, 2022.

    The revised leverage ratio treatment of client cleared derivatives sets out a targeted revision of the leverage ratio measurement of client cleared derivatives to align it with the standardized approach to measuring counterparty credit risk exposures (SA-CCR). This treatment permits both cash and non-cash forms of segregated initial margin and cash and non-cash variation margin received from a client to offset the replacement cost and potential future exposure for client cleared derivatives only. This limited revision balances the robustness of the leverage ratio as a non-risk-based safeguard against unsustainable sources of leverage with the policy objective set by the G20 Leaders to promote central clearing of standardized derivative contracts. BCBS revised this treatment following its evaluation of the impact of the leverage ratio on banks' provision of client clearing services and the evaluation of quantitative and qualitative information on banks' exposures to client cleared derivatives. 

    The revisions to leverage ratio disclosure requirements set out additional requirements for banks to disclose their leverage ratios based on quarter-end and daily average values of securities financing transactions. A comparison of the two sets of values will allow market participants to better assess banks' actual leverage throughout the reporting period. BCBS has finalized this disclosure requirement to address concerns expressed in a newsletter published last year regarding the potential regulatory arbitrage by banks in the form of window-dressing. The concern was that temporary reductions of transaction volumes around reference dates result in the reporting and public disclosure of artificially elevated leverage ratios. BCBS will continue to carefully monitor the potential window-dressing behavior by banks. BCBS has also published revisions to the Pillar 3 disclosure templates and instructions that will serve to implement these revised disclosure requirements.

     

    Related Links

    Keywords: International, Banking, Leverage Ratio, Derivatives, Pillar 1, Pillar 3, SA-CCR, Reporting, G20, Disclosures, Credit Risk, Window Dressing Behavior, Basel III, BCBS

    Featured Experts
    Related Articles

    PRA Publishes Q&A on Property Valuation Requirements Under CRR

    PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.

    May 29, 2020 WebPage Regulatory News
    News

    IOSCO Consults on Outsourcing Principles for Operational Resilience

    IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.

    May 28, 2020 WebPage Regulatory News
    News

    MAS Consortium to Develop AI Fairness Metrics for Credit Scoring

    MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.

    May 28, 2020 WebPage Regulatory News

    BoE Updates Definitions for BTL Data Collection

    BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.

    May 28, 2020 WebPage Regulatory News
    News

    FSI Examines Financial Stability Implications of Payment Deferrals

    FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.

    May 28, 2020 WebPage Regulatory News
    News

    PRA Finalizes Policy on Prudent Person Principle Under Solvency II

    PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.

    May 27, 2020 WebPage Regulatory News
    News

    EBA on Extending Large Exposure Limits for French Systemic Banks

    EBA published an opinion following the notification by the French macro-prudential authority, the Haut Conseil de Stabilité Financière (HCSF), of its intention to extend a measure introduced in 2018 on the use of Article 458(9) of the Capital Requirements Regulation (CRR).

    May 27, 2020 WebPage Regulatory News
    News

    ECB Highlights NPL Resolution as Key Policy Issue in Post-COVID Europe

    As part of a Research Bulletin on the recent policy-relevant work, ECB published an article that examines the lessons learned from past crises for nonperforming loan resolution in the post COVID-19 period.

    May 27, 2020 WebPage Regulatory News
    News

    RBNZ Publishes Financial Stability Report for May 2020

    RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.

    May 27, 2020 WebPage Regulatory News
    News

    ECB Updates Guidance on Reporting of Securities Holdings Statistics

    ECB updated the guidance notes for reporting related to the statistics on holdings of securities by reporting banking groups (SHSG).

    May 26, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5231