Brussels, 13/01/2014 (Agence Europe) - The Group of Governors and Heads of Supervision (GHOS) at the Basel Committee decided on Sunday 12 January to change the calculation method for the leverage ratio that banks must abide by in 2018.
The leverage ratio has been set at 3%, and is the ratio of top quality own finance (core Tier One) to all a bank's assets, not taking risk into account. Warning of the dangers of an over-strict interpretation that would penalise the financing of the real economy, the bank sector has managed to ensure that short-term financing operations will be able to use net positions in some cases, a change on the June 2013 suggestion that gross positions would have to be used. The calculation method for the scale of off-balance sheet activities has also been relaxed, so that the measures taken into account when measuring a bank's exposure to credit derivatives will be capped at the maximum potential loss.
Banks will have to give details of their leverage ratio from January 2015 onwards. Under the EU rules known as CRD IV (transposing the Basel III regulations into the EU), the European Commission will publish a report on this in 2016 before unveiling draft legislation to make the leverage ratio compulsory in 2018. (MB/transl.fl)