The Basel Committee recently finalized its revisions to the Basel III leverage ratio. Compared to its June 2013 proposal, the Basel Committee has made several important changes to the denominator of the Basel III leverage ratio. Davis Polk’s visual memorandum uses diagrams, comparison tables, examples and formulas to illustrate the Basel Committee’s revisions to the Basel III leverage ratio and potential U.S. implementation issues.
[Detailed client memorandum to come.] We have prepared a blackline that compares the Basel Committee’s January 2014 final revisions to the Basel III leverage ratio to the June 2013 proposed revisions. We will be publishing a client memorandum that discusses the key changes to the Basel III leverage ratio.
Background: Today, the Basel Committee issued final revisions to the Basel III leverage ratio framework and disclosure requirements following endorsement by its governing body, the Group of Governors and Heads of Supervision (GHOS).… Read More
Today, the Basel Committee’s oversight body, the Group of Governors and Heads of Supervision (GHOS), endorsed a number of important proposed and final revisions to the Basel III capital and liquidity standards, including:
- Revisions to the Basel III leverage ratio, which are intended to reflect agreement on a consistent measure of leverage “to overcome differences in national accounting frameworks” and to maintain the leverage ratio as a “backstop” to risk-based capital requirements;
- Proposed changes to the Basel III net stable funding ratio (NSFR), for which the Basel Committee has released a consultative document;
- Final Pillar 3 disclosures standards relating to the Basel III liquidity coverage ratio (LCR);
- Revisions to the Basel III LCR providing that committed liquidity facilities of a type already recognized for jurisdictions with insufficient high-quality liquid assets (HQLAs) may have a role to play within the LCR framework; and
- The Basel Committee’s strategic priorities for the next two years, which include ongoing monitoring and assessment of Basel III implementation; further examining the Basel framework’s balance between simplicity, comparability and risk sensitivity; and improving effectiveness of supervision.
The UK Chancellor of the Exchequer has requested that the Bank of England’s Financial Policy Committee conduct a review into the role for the leverage ratio within the capital framework for UK banks. The exchange of letters between the UK Chancellor of the Exchequer and the Governor of the Bank of England are included below.
In his letter, Mark Carney, the Governor of the Bank of England, stated that the Financial Policy Committee will publish some high-level considerations on the role of the leverage ratio within the overall capital framework in its Financial Stability Report on November 28, 2013.… Read More
Basel III Leverage Ratio: U.S. Proposes American Add-on; Basel Committee Proposes Important Denominator Changes
On the heels of publishing the U.S. Basel III final rule, the U.S. banking agencies have proposed higher leverage capital requirements for the eight U.S. global systemically important banks (G-SIBs) and their insured depository institution subsidiaries. The higher leverage capital requirements, which we are calling the American Add-on, build upon the minimum Basel III supplementary leverage ratio in the U.S. Basel III final rule.
Recently, the Basel Committee on Banking Supervision has proposed important changes to the Basel III leverage ratio. … Read More
In his statement at today’s open meeting to approve the U.S. Basel III final rule, Federal Reserve Governor Daniel K. Tarullo previewed “four rulemakings that will enhance capital requirements for the eight U.S. banking organizations already identified as of global systemic importance.” Governor Tarullo described these four rulemakings for the 8 U.S. G-SIBs as being in various stages of development.
1. Higher Basel III Leverage Ratio: According to Governor Tarullo, the U.S. banking regulators are very close to issuing a proposal to establish a leverage ratio for the eight U.S.… Read More