EBA reports on impact of possible leverage ratio definitions

Without comments from my own: the European Banking Authority (EBA) published today a report on the leverage ratio which provides a policy analysis and a quantitative assessment of the impact that would derive from aligning the current Capital Requirements Regulation (CRR) definitions of the leverage ratio’s exposure measure to the revised standard published by the Basel Committee on Banking Supervision (BCBS) on 12 January 2014 (‘Basel III’). The EBA has produced the report on its own initiative to provide recommendations to the European Commission in view of its forthcoming delegated act on the definitions of leverage ratio.

The report uses data collected for the Basel III monitoring exercise as of 30 June 2013 through a sample consisting of 173 EU institutions from 18 Member States.

Overall, the assessment indicates that the revised Basel III framework leads to leverage ratios that are broadly in line with, or possibly slightly higher than, leverage ratios calculated according to the current CRR. On this basis, and considering that the revised Basel III framework represents a more accurate measure of leverage, the EBA recommends, in the interest of consistency between the leverage ratio calculation within the EU and the other jurisdictions that implement Basel III, aligning the CRR definition of the leverage ratio’s exposure measure to the Basel III framework. The analysis underlying this report has not indicated any EU specificities which would prompt a deviation from the BCBS standard.

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