Are there any requirements with respect to the leverage ratio?
Banking & Finance
The Bank of Israel Proper Banking Conduct Rule 218 implements the requirements from banking institutions to calculate their leverage ratio, namely the ratio between their Tier 1 capital and their exposure levels. Generally, following the implementation of the Basel III Rules Israel transferred from a policy of reviewing the total capital adequacy to a policy of being focused more on the Tier 1 capital.
The exposure levels will generally be calculated in accordance with the accounting principles, with certain exceptions (primarily: (a) certain adjustments to the calculations of balance sheet exposures and non-derivative items; and (b) the prohibition on setting off loans and deposits). Furthermore, PBC Rule 218 includes elaborate instructions and guidelines as to the methods of calculating the leverage ratio, the items which are to be included as well as the items which may, or should, be set-off or disregard when making the calculations.
As of this date, the minimum leverage ratio of banking institutions in Israel whose balance sheets comprise 20% or more of the total balance sheet assets of banking institutions in Israel (currently the two largest banks in Israel) is 6% and for all other banking institutions – 5%.
Similarly to regulatory capital requirements, the leverage ratio and the prevention of excessive leverage are regulated through the CRR. Accordingly, the credit institutions shall maintain appropriate and effective written procedures and policies for the identification, management and monitoring of the risk of excessive leverage in order to ensure that such risk is addressed in a precautionary manner and that the credit institutions are able to withstand a range of different stress events with respect to the risk of excessive leverage.
HNB as supervisory authority shall review and evaluate – among others – the exposure of credit institutions to the risk of excessive leverage as well as the adequacy of the arrangements, strategies, processes and mechanisms implemented to manage the risk thereof. In case of any related failures from the side of the credit institutions, the HNB is entitled to take different type of measures depending on the severity of the risk.
A leverage ratio (LR) is a new regulatory and supervisory tool for the EU. On 3 August 2016, the European Banking Authority (EBA) published its report on the impact assessment and calibration of the LR, recommending the introduction of a LR minimum requirement in the EU to mitigate the risk of excessive leverage (https://www.eba.europa.eu/-/eba-recommends-introducing-the-leverage-ratio-in-the-eu). The analysis suggests that the potential impact of introducing a LR requirement of 3% on the provision of financing by the banks would be relatively moderate, while, overall, it should lead to more stable banks.
Therefore, currently the Latvian law states that banks shall draw up and implement a cautious strategy, policies, procedures and systems which allow timely identification, assessment, analysis and management of credit risks, concentration risk, market risk, operational risk, interest rate risk of the non-trading-book, liquidity risk, excessive leverage risk and other important risks of the bank. In addition, the FCMC shall, also assess, among other things, the vulnerability of banks to excessive leverage risk.
All banks are subject to capital, liquidity coverage and other requirements that banks must observe. These requirements, including the leverage ratio, serve as safeguards that help ensure safe and sound banking activities. Lithuania applies the requirements set by the EU law with regard to leverage ratio, including EU regulations No. 575/2013, No. 2015/61 and No. 2015/62, without significant deviations.
Yes, in general banks in Poland must counteract the‧risk of excessive leverage (within the meaning of the CRR).
Banks here must disclose their leverage to the National Bank of Poland and the Polish FSA.
There are no special requirements. In line with Basel III requirements, the leverage ratio is reported to the supervisory authorities on a quarterly basis. The NBR takes into account the model business of the credit institutions in order to determine the adequacy of the leverage ratio and the governance framework, strategies, procedures and mechanisms implemented by credit institutions to manage the risk associated with excessive leverage.
Indian banks have been required to publicly disclose their Basel III leverage ratio on a consolidated basis since 1 April 2015. Guidelines on calculation of capital measure and exposure measure (including on-balance sheet items, derivatives, treatment of collateral, etc.) have been provided. However, this was based on the definition published under the Basel III framework in 2014 and the RBI had noted that the final rules regarding leverage ratio would be published by end-2017. Therefore this requirement was deemed to be a ‘parallel run’ for the time being. As of January 2015, the Indian banking system was reported to be operating at a leverage ratio of more than 4.5%. The BCBS has now published its final rules on leverage ratio (in December 2017) and it is expected that the RBI will accordingly finalise the Indian requirements and set an implementation date for the Indian banks soon.
A bank with international operations is required to disclose its leverage ratio on a quarterly basis, but the FSA has yet to set a minimum leverage ratio.
Currently, the MFSA requires credit institutions to monitor and report on their leverage ratio. Once the binding leverage ratio requirement becomes effective, as part of the CRR reforms, credit institutions will be required to comply with the applicable thresholds.
The CBN’s Guidance Notes on Regulatory Capital requires Nigerian banks to maintain healthy leverage ratios to ensure their ability to meet financial obligations. Banks are required to maintain a minimum regulatory capital adequacy ratio of 10% - 15% on an on-going basis. A minimum regulatory Capital Adequacy Ratio (CAR) of 15% will be applicable to banks with international authorisation and Systemically Important Banks (SIBs) while a CAR of 10% will be applicable to other banks.
The current leverage ratio requirement for Norwegian banks is 3 percent, as set out in CRD IV and CRR. On top of that, all banks must in addition have a leverage ratio buffer on 2 percent, and 3 percent for systemically important banks.
The requirements concerning the leverage ratio derive directly from Regulation (EU) 575/2013 and indirectly from the recommendations issued by the European Banking Authority. For instance, the leverage ratio shall be calculated as an institution’s capital measure divided by that institution’s total exposure measure, expressed as a percentage, and where the capital measure shall be the Tier 1 capital.
Credit institutions shall have policies and practices in order to identify, manage and monitor the risk of excessive leverage. They shall address the risk of excessive leverage in a precautionary manner by taking due account of potential increases in the risk of excessive leverage caused by reductions of the institution’s own funds, and shall be able to withstand a range of different stress event.
Banco de Portugal shall review and evaluate the exposure of credit institutions to the risk of excessive leverage as reflected by indicators of excessive leverage, taking into consideration the business model of credit institutions when assessing the adequacy of their leverage ratio and of the arrangements, strategies, processes and mechanisms implemented by institutions to manage the risk of excessive leverage.
Qatar Central Bank Instructions to banks Volume 2 November 2011 states that Basel Committee on Banking Supervision (BCBS) is introducing a simple, transparent, non-risk based leverage ratio, in order to constrain build-up of leverage in the banking sector and reinforce risk based requirements based on a “back-stop” measure. Banks may furnish their views and plans on the definition, exposure measures used in computing the leverage ratio, and transitional arrangements.
The QCB had issued a Liquidity Coverage Ratio (LCR) circular to banks in January 2014 and it was amended in May 2014 to incorporate the changes effected by the Basel Committee on Banking Supervision (BCBS).
In July 2014 the QCB issued another circular to the banks in Qatar on Leverage Ratio. The implementation started with effect from September 2014 as per the finalized BCBS document issued in January 2014 to test a Tier 1 leverage ratio of 3 percent.
Basel III leverage ratio framework is implemented in Turkey under the Regulation on the Calculation and Evaluation of the Leverage Levels of Banks (the “Leverage Regulation”) in order to ensure that banks maintain adequate levels of capital on consolidated and unconsolidated basis against risk exposure. The leverage ratio shall be calculated on a monthly basis and similar to Basel III, the Leverage Regulation stipulates that the quarterly arithmetical mean of the monthly-calculated leverage ratios of banks shall not fall below the minimum leverage ratio of 3%.
Since 2015 all institutions are required to disclose their leverage ratio and its components. Supervisors will track the new ratio in order to analyse its impact more closely and to complete possible adjustments to the definition by 2017. The European Commission proposed an amendment of the CRR implementing a binding leverage ratio requirement of 3% of Tier 1 capital.
In order to implement the BCBS's final leverage ratio requirement, the Swiss regulations will be revised to, starting the course of 2018, require a leverage ratio of 3% for all banks.
See above at Question 10. for the existing leverage ratio requirements for systemically important banks and Swiss G-SIBs.
BNB applies the applicable requirements of Regulation 575/2013.
The Ecuadorian legislation does not establish any general regulation regarding leverage ratio for financial institutions. However, this leverage ratio must be considered depending of the type of activity that will perform the financial institution with is clients.
CRR requires annual reporting on leverage ratios by all banks on both an individual and consolidated basis. CRR provides that member states may impose a hard leverage ratio. While Ireland has not im-posed hard leverage ratios the CBI has stated that it strongly supports EU implementation of a binding minimum Pillar 1 leverage ratio of 3%.
Banking institutions comply with the prudential regulation and regarding the leverage ratio they must im-plement policies and processes to detect, manage and monitor the risk of excessive leverage deter-mined according to CRR.
The leverage ratio was initially introduced by the European capital requirements regulation of 26 June 2013 (CRR) as an observation ratio that had to be disclosed to relevant supervisory authorities. Since January 2015, credit institutions also need to publicly disclose such ratio. As part of the Basel IV/CRD V package, the European Commission has proposed a binding requirement to maintain a leverage ratio of 3%.
In Estonia credit institutions are required to establish the procedure and measures for assessment, management and control of excessive leverage. The non-compliance of exposure and assets and liabilities calculated pursuant to Regulation (EU) No.575/2013 of the European Parliament and of the Council shall be taken account of upon assessment of risk of excessive leverage. Credit institutions are also required to cope with stress events which are related to risk of excessive leverage, and take account of the potential decrease of own funds of the credit institution due to losses.
Yes. As determined by the ECB, the leverage ratio of EU credit institutions must not be lower than 3%. All Greek banks are required to report their leverage ratio, calculated on the basis of the methodology of article 429 of Regulation 575/2013 (as subsequently amended), on a quarterly basis to the BoG.
A credit institution’s leverage ratio and its components have to be reported to the regulatory authorities on a quarterly basis. The calculation of the leverage ratio has to be made in accordance with Art 429 CRR in connection with Delegated Regulation (EU) 2015/62. Currently there is no quantitative element regarding the leverage ratio that has to be met. However, the current drafts of the amended CRR and CRD IV contain maximum leverage ratios.
US federally-chartered banks must maintain a leverage ratio of at least 4 percent. Large, internationally active banking organisations—generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposure—are also subject to a supplementary leverage ratio of 3 percent. Bank holding companies with more than $700 billion in consolidated total assets or more than $10 trillion in assets under custody must meet an enhanced supplementary leverage ratio that is 2 percentage points greater than the supplementary leverage ratio.
There are no requirements with respect to leverage ratio.
The credit institution must have the methods in place to recognize, manage and follow up any excessive leverage risk and adhere to the leverage ratio requirements. The legal basis of the leverage ratio requirements is the Capital Requirements Regulation, as amended by Commission Delegated Regulation (EU) 2015/62. The Capital Requirements Regulation sets out the calculation of the leverage ratio and the reporting requirements in relation to that ratio.
Yes, the UK through the PRA Rules introduced a 3% leverage ratio, subject to exceptions, on 1 January 2016 and now has a requirement that a regulated firm must hold sufficient tier 1 capital to maintain, at all times, a minimum leverage ratio of 3.25%.
The rules apply to every firm that is a UK bank or a building society that, on the firm’s last accounting reference date, had retail deposits equal to or greater than £50 billion either on: (1) an individual basis; (2) if the firm is a parent institution in a Member State, on the basis of its consolidated situation; or (3) if the firm is controlled by a parent financial holding company in a Member State or by a parent mixed financial holding company in a Member State and the PRA is responsible for supervision of that holding company on a consolidated basis under Article 111 of the CRD, on the basis of the consolidated situation of that holding company.