Proposes Changes to the Calculation and Overall Leverage Limits
On March 6, 2016, the Basel Committee on Banking Supervision (BIS) published a consultation paper proposing to amend or “calibrate” the Basel III non-risk-based leverage ratio. Banks have been lobbying the Committee quite aggressively to make changes to the way the leverage ratio leverage ratio is calculated to alter the ratio’s overly rigid approach, which they say ignores or fails to take into account the way banks handle transactions in derivatives in practice. This consultation proposes some softening of the rules by which banks that trade large numbers of financial derivatives calculate their leverage ratios. In addition, the consultation seeks comment on potentially raising the leverage ratio limit above 3% for certain global systemically important banks (G-SIBS) like Goldman Sachs, Societe Generale, Morgan Stanley and HSBC, while leaving it the same for other banks.