14 December 2018
On 13 December. the Basel Committee on Banking Supervision published a consultative document entitled Revisions to leverage ratio disclosure requirements.
The Basel III leverage ratio standard comprises a 3% minimum level that banks must meet at all times, a buffer for global systemically important banks and a set of public disclosure requirements. For the purpose of disclosure requirements, banks must report the leverage ratio on a quarter-end basis or, subject to approval by national supervisors, report a measure based on averaging (eg using an average of exposure amounts based on daily or month-end values).
Heightened volatility in various segments of money markets and derivatives markets around key reference dates (eg quarter-end dates) has alerted the Basel Committee to potential regulatory arbitrage by banks. A particular concern is “window-dressing”, in the form of temporary reductions of transaction volumes in key financial markets around reference dates resulting in the reporting and public disclosure of elevated leverage ratios. In this regard, the Committee published a newsletter in October 2018 in which it indicated that window-dressing by banks is unacceptable, as it undermines the intended policy objectives of the leverage ratio requirement and risks disrupting the operations of financial markets.
For additional information, please read the full press release