Leverage Ratio is designed to be a simple accounting-based capital requirement, even though the final rules introduce a significant implementation complexity. Under the Swiss SiFi rules, the new going-concern minimum requirement starting as of 2019 requires that a ratio of at least 4.5% to 5% of Swiss CET1 capital and high trigger tier-1-loans has to be maintained depending on the system relevance. For non SiFi institutions the minimum requirements are yet to be determined.
Based on the results of the period from 1 January 2013 to 1 January 2017, any final adjustments to the definition and calibration of the Basel III leverage ratio will be carried out by 2017 by the Basel committee, with a view to migrating to a Pillar 1 treatment on 1 January 2018 based on appropriate review and calibration.
- 2 Consultation period 06/14-08/14
- 5 Publication of final decree 01/17-12/17
- 7 Enactment / transitional period 01/18-
There are a number of challenges when reporting the Leverage Ratio exposures, even though most of the exposure is derived from pure accounting figures. The implementation requires additional (non financial) accurate and reconciled data feeds, requiring trade-level attributes for e.g. repo-style transactions and off-balance sheet positions. Leverage ratio optimization is most likely to require a balance sheet reduction, by actually shifting the business model to adopt less balance sheet intensive trades where possible. Optimization through refinement of data, in order to apply the rules at the highest precision level can require significant efforts, such that costs may only be outweighed by benefits for larger institutions.
- FINMA veröffentlicht Rundschreiben «Leverage Ratio» und «Offenlegung Banken»
- Basel III leverage ratio framework and disclosure requirements
- FINMA media release: «Schweizer Too-big-to-fail-Regime entscheidend verstärkt»