Directive and Leverage Ratio: Difference between pages

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''European Union law''.  
''Bank regulation''.
An act of European Union (EU) law having indirect effect in relevant member states.
 
The member states affected by the EU Directive are required to implement the directive domestically, but they are free to choose the form and method for doing so.
(LR).
 
A requirement under Basel III regulations for regulated institutions to hold a minimum ratio of capital to absolute balance sheet outstandings (plus certain other items).
 
It is calculated as:
 
LR = Tier 1 capital / Leverage Ratio Exposure (LRE)
 
 
The leverage ratio is the long term capital ratio for banks by which their Tier 1 capital should in due course be at least 5% of their assets.
 
This will generally be that their shareholders funds will be >=5% of their loans although the definitions may be subject to domestic practices.
 
 
Domestic regulators can set higher ratios and the USA has set higher ratios for eight Systemically Important Financial Institutions (SIFIs) than for non-SIFIs.
 
This requirement is intended to be implemented progressively by 1 January 2019.
 
 
The initial minimum Basel III requirement was set at 3%, for periods to the end of 2016.
 
 
=====Leverage Ratio Exposure=====
The [[Leverage Ratio Exposure]] (LRE) - for the purposes of calculating the Leverage Ratio - includes certain other risk exposures, in addition to on-balance sheet assets.
 


== See also ==
== See also ==
* [[Decision]]
* [[Basel III]]
* [[European Union ]]
* [[Countercyclical leverage ratio buffer]]
* [[Regulation]]
* [[G-SII ALRB]]
* [[Secondary legislation]]
* [[Liquidity Coverage Ratio]]
* [[Solvency II]]
* [[Net stable funding ratio]]
* [[Leverage]]
 
* [[Leverage Ratio Exposure]]
*[[LRT]]
* [[Off balance sheet risk]]
*[[Systemically Important Financial Institution]]

Revision as of 13:16, 11 November 2016

Bank regulation.

(LR).

A requirement under Basel III regulations for regulated institutions to hold a minimum ratio of capital to absolute balance sheet outstandings (plus certain other items).

It is calculated as:

LR = Tier 1 capital / Leverage Ratio Exposure (LRE)


The leverage ratio is the long term capital ratio for banks by which their Tier 1 capital should in due course be at least 5% of their assets.

This will generally be that their shareholders funds will be >=5% of their loans although the definitions may be subject to domestic practices.


Domestic regulators can set higher ratios and the USA has set higher ratios for eight Systemically Important Financial Institutions (SIFIs) than for non-SIFIs.

This requirement is intended to be implemented progressively by 1 January 2019.


The initial minimum Basel III requirement was set at 3%, for periods to the end of 2016.


Leverage Ratio Exposure

The Leverage Ratio Exposure (LRE) - for the purposes of calculating the Leverage Ratio - includes certain other risk exposures, in addition to on-balance sheet assets.


See also