Revisions proposed to the Basel III leverage ratio framework and answers to frequently asked questions issued by the Basel Committee
06 April 2016
The Basel Committee on Banking Supervision released a consultative document entitled Revisions to the Basel III leverage ratio framework, and responses to a third set of FAQs.
The Basel III framework introduced a simple, transparent, non-risk-based leverage ratio to act as a supplementary measure to the risk-based capital ratio. This consultative document proposes a set of changes to the standard released in January 2014. The proposed changes to the framework are an important element of the regulatory reform programme that the Basel Committee has committed to finalise by end-2016.
The proposed revisions cover the following issues:
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to measure derivative exposures, the Committee is proposing to use a modified version of the standardised approach for measuring counterparty credit risk exposures (SA-CCR) instead of the Current Exposure Method (CEM);
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to ensure consistency across accounting standards, two options are proposed for the treatment of regular-way purchases and sales of financial assets;
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clarification of the treatment of provisions and prudential valuation adjustments for less liquid positions, so as to avoid double-counting; and
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alignment of the credit conversion factors for off-balance sheet items with those proposed for the standardised approach to credit risk under the risk-based framework.
The Committee is also seeking comment on an additional leverage ratio requirement applicable to global systemically important banks.
The final design and calibration of the proposals will be informed by a forthcoming comprehensive quantitative impact study.
The Committee welcomes comments from the public on all aspects of the proposals described in this document here by 6 July 2016.
Press release
Full consultative document
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