Bank of England paper offers support for Basel III Leverage Ratio
The leverage ratio: a balance between risk and safety What was the root cause of the financial crisis? Ask any economist or banker and undoubtedly they will at some point…
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Natixis’s Bertrand Bordais, Government Bond Repo Head for GSF, on EU repo market conditions and the outlook for the coming year
Securities Finance Monitor recently spoke with Bertrand Bordais, Global Head of MM Government Bond Repo of the Global Securities Financing team at Natixis. Bertrand shared his views on the European…
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ECB helps bank Leverage Ratios but doesn’t address the bigger Basel challenge (Premium)
The European Central Bank (ECB) announced last week that it would temporarily exempt central bank assets of supervised banks from the Basel III Leverage Ratio. This decision will free up…
Read More Barclays: ECB Leverage Ratio relief not a game changer for euro short rates
The ECB Banking Supervision’s decision limits the impact of banks’ balance sheet expansion due to the big reserves increase on their lending activity and market intermediation. Barclay analysts do not…
Read More ECB allows temporary relief in banks’ leverage ratio until late June 2021
ECB Banking Supervision exercises regulatory discretion declaring exceptional circumstances Measure allows banks to exclude central bank exposures from leverage ratio Banks to benefit from relief measure until 27 June 2021…
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Reader feedback on our report, “Leverage Ratios, SA-CCRs and Securities Finance” (Premium)
Few topics in capital markets can create excitement like Basel regulations. Following the release of our report last week, “Leverage Ratios, SA-CCRs and Securities Finance,” we received insightful and detailed…
Read More Fed blog: banks again taking advantage of Leverage Ratio arbitrage
Leverage limits as a form of capital regulation have a well-known, potential bug: If banks can’t lever returns as desired, they can boost returns on equity by shifting toward riskier,…
Read More Switzerland’s FINMA extends Leverage Ratio exemption of central bank assets
In Guidance 06/2020 of 19 May 2020, FINMA adjusts the periods of various exemptions already granted. Clients are continuing to hold unusually large deposits with Swiss banks. FINMA is therefore…
Read More Bank of England: Bounce Bank Loans can be excluded from UK Leverage Ratio
HM Treasury recently launched the Covid-19 Bounce Back Loan scheme (BBLS). This statement sets out the PRA’s observations on the risk weighted treatment of exposures under the scheme, particularly eligibility…
Read More European Commission proposes changes to IFRS9 and Leverage Ratio but fails to exempt government bonds
Coronavirus response: Banking Package to facilitate bank lending- Supporting households and businesses in the EU Changes to IFRS9 The application of IFRS 9 during the Coronavirus pandemic may lead to…
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ECB collateral adjustments help, but the EU must still take big moves on bank balance sheets (Premium)
While the European Central Bank’s (ECB) adjustments to acceptable collateral and other tweaks have been useful, what really needs to happen is a significant and competitive move by the EU…
Read More Reuters: Europe’s banks want regulators to match U.S. leverage plan
Earlier this month, the Fed proposed a temporary easing of a supplementary leverage ratio rule that applies to the biggest U.S. banks that have assets of more than $250 billion.…
Read More Japanese regulators plan to exempt central bank holdings from bank leverage ratios
Twelfth Meeting of the “Council for Cooperation on Financial Stability” On April 8, 2020, the Financial Services Agency (FSA) and the Bank of Japan (BOJ) held the twelfth meeting of…
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Monday News Roundup: new data, fast moving regulations, repo trends and more (Premium)
These are tough times to follow what’s happening: nearly every day seems like it brings major pieces of news that in ordinary times would warrant consideration, but now it’s just…
Read More Regulation Asia: HKMA Asks Banks to Prepare Systems for Revised Leverage Ratio
Both the revised leverage ratio treatment of client cleared derivatives and the revised disclosure requirements will come into effect in Hong Kong on 1 January 2022, in line with the…
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Winners and losers from the Basel Committee’s Leverage Ratio changes on margin and window-dressing
The Basel Committee on Banking Supervision (BCBS) issued changes to the Leverage Ratio last week that will have impacts to the derivatives and securities finance industries. Like any regulation, this…
Read More Basel Committee finalizes Leverage Ratio revisions for client margin and window-dressing for SFTs
The Basel Committee on Banking Supervision today released a revised treatment of client cleared derivatives for purposes of the leverage ratio. The Basel Committee also issued a revision to the…
Read More Basel Committee seeks to improve Leverage Ratio for margin, Securities Finance Transactions
The Basel Committee on Banking Supervision met in Basel on 19-20 June to discuss a range of policy and supervisory issues, and to take stock of its members’ implementation of…
Read More BofE working paper finds (again) that Leverage Ratio damages repo market resilience
Decomposing changes in the functioning of the sterling repo market Joseph Noss and Rupal Patel We identify the degree to which changes in gilt repo market functioning have been driven…
Read More ABA: FDIC Approves Proposal to Exclude Central Bank Deposits from SLR
March 29, 2019 The FDIC today approved a joint agency proposal to exclude central bank deposits from the denominator of the supplementary leverage ratio for banking organizations predominantly engaged in custody banking…
Read More ICMA supports daily leverage ratio calculations but asks for targeted refinements to support repo
ICMA ERCC responds to BCBS consultation on leverage ratio disclosure March 13 2019 The ICMA ERCC has today responded to a consultative document published by the Basel Committee on Banking…
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For US banks, is CCAR or the Leverage Ratio the binding constraint on securities finance
The Federal Reserve’s Comprehensive Capital Adequacy Review (CCAR) stress test are more of a binding constraint on bank’s use of capital than the Leverage Ratio for some activities, for example…
Read More World Federation of Exchanges responses to Basel Committee’s Leverage Ratio Consultation
The World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, has published its response to the Basel Committee on Banking Supervision’sconsultation on the leverage ratio treatment…
Read More How final are the Basel Committee’s market risk rules?
The Basel Committee’s “Minimum capital requirements for market risk” is a statement of finalization for important bank risk management rules. But is this really a finalization or another stop on…
Read More Basel Committee seeks to reduce window dressing in the Leverage Ratio
The Basel III leverage ratio standard comprises a 3% minimum level that banks must meet at all times, a buffer for global systemically-important banks and a set of public disclosure…
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Europe readies for CRD-V (Premium)
The European Parliament and the European Council are in discussions to amend the Capital Requirements Directive and Regulation rules (CRD-IV) to create CRD-V. This latest iteration recognizes recent Basel Committee…
Read More BoE working paper: The leverage ratio, risk-taking and bank stability
This paper addresses the trade-off between additional loss-absorbing capacity and potentially higher bank risk-taking associated with the introduction of the Basel III leverage ratio. This is addressed in both a…
Read More Basel Committee seeks views on the leverage ratio treatment of client cleared derivatives
The Basel Committee on Banking Supervision today published a consultative document entitled Leverage ratio treatment of client cleared derivatives. A key element of the Basel Committee’s post-crisis Basel III reforms…
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The ECB on repo in the Leverage Ratio: taking a strong stand today may not turn out well tomorrow
The ECB’s publication last week of “The implications of removing repo assets from the leverage ratio” creates a conundrum. On the one hand, the findings stick true to the Basel…
Read More ECB: removing repo from the Leverage Ratio would be a bad idea
This article summarises the key findings from a counterfactual exercise where the effect of removing repo assets from the leverage ratio on banks’ default probabilities is considered. The findings suggest…
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How the Basel change on settled-to-market will impact balance sheets (Premium)
The Basel Committee has issued a new FAQ on how banks need to treat settled-to-market derivatives transactions in the Liquidity Coverage Ratio and Net Stable Funding Ratio. This will renew…
Read More World Federation of Exchanges calls for global reform of Leverage Ratio
London, Friday 7 September 2018 – The World Federation of Exchanges (“WFE”), the global industry group for CCPs and exchanges, has today published its response to the four global standard-setting boards…
Read More Bank of England paper on repo finds what the market knows: UK Leverage Ratio damages liquidity and creates regulatory arbitrage
This paper shows that the leverage ratio affects repo intermediation for banks and non-bank financial institutions. We exploit a novel regulatory change in the UK to identify an exogenous intensification of…
Read More Risk: EU Considering Moving Leverage Ratio Reporting From Quarterly to Daily
The European Parliament wants to close a loophole in leverage-ratio reporting by making banks calculate the ratio daily, instead of quarterly. The switch is intended to reduce volatility by curbing…
Read More BoE reviews types of bank internal capital markets
Banks allocate capital to their business lines to assess those lines’ relative performance, which informs their strategic decisions. Capital allocation, together with Fund Transfer Pricing (FTP), are two important internal…
Read More BoE research suggests leverage ratio disincentives client clearing
As part of the post-crisis regulatory reform, many interest-rate derivative transactions are required to be centrally cleared. Nevertheless, the treatment of this type of transaction under the leverage ratio (LR)…
Read More Dodd-Frank reform passes US Senate but the House will be tough (Premium)
The Economic Growth, Regulatory Relief, and Consumer Protection Act passed the US Senate last week with important roll backs of the Volcker Rule and US Leverage Ratio. This is the…
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Finadium Survey: Better Regulation for Europe’s Securities Financing Transactions
European regulation of Securities Financing Transactions (SFTs) is having its desired effect, which is a near gold standard of risk management. Unfortunately, it’s at the cost of market vibrancy. A…
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A Proposal for Smart Regulation in European SFT Markets
In a post-crisis era, Europeans must focus on efficient and smart regulation in Securities Financing Transactions (SFT) to support competitive financial markets. This can be achieved but requires regulatory attention…
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The Minneapolis Fed wants a 15% Leverage Ratio and a 1.2% tax on secured financing. That’s one way to reduce risk…
The Federal Reserve Bank of Minneapolis has released a plan to end Too Big to Fail (TBTF) on a comprehensive basis. The choice is again between strengthening bank balance sheets…
Read More Global CCP group warns on Basel rules under LR
Due to the publication of Finalising post crisis reforms by the Basel Committee on Banking Supervision, CCP12 would like to highlight its continued concerns regarding the application of the Leverage Ratio on CCP…
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A quick primer on “settled-to-market” vs. “collateralized-to-market” in counterparty credit risk (Premium)
CCPs have changed or are changing their rules on Variation Margin to allow “settled-to-market” (STM). This is a useful change that will save money, and complements the desire of firms…
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Finalizing Basel III: the revised Leverage Ratio gets a thumbs down and really isn’t final anyhow
The Basel Committee on Banking Supervision released their “final” Basel III post-crisis reform documentation last week, and there is a lot to unpack. Already, the Quantitative Impact Study shows that…
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What does “recalibrating” the Leverage Ratio mean?
There has been a lot of talk lately about recalibrating the Leverage Ratio, especially in the US where the enhanced Supplementary Leverage Ratio (eSLR) of 5% for holding companies and…
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Are carve-outs in national versions of the Leverage Ratio a good idea?
There has been discussion in recent months about the possibility of large carve-outs in the US Supplementary Leverage Ratio; this follows years of carve-outs in the European version of Basel…
Read More BoE: the leverage ratio and liquidity in the gilt and repo markets
Market participants have argued that a significant unintended consequence of post-crisis regulatory leverage ratio requirements has been a reduction in the liquidity of fixed income markets. In this Bank of England…
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Hong Kong, Singapore or EU post-Brexit: will Advanced Approach bank capital models be a consideration? (Premium)
The news that London-based banks are considering Hong Kong as a new APAC “booking entity” trading hub brings up an important qualification for banks looking for an expanded Asian base…
Read More BoE: solvency and wholesale funding cost interactions at UK banks
In a staff working paper, Bank of England researchers study the interaction between solvency and funding costs at UK banks. They use the market-based leverage ratio as a proxy for market participants’…
Read More The layering of regulatory cost on Securities Financial Transactions
It is now part of financial textbook wisdom that collateralization is a favored tool to reduce unsecured exposures in financial systems and thereby promote systemic stability. However, in stark contrast,…
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How fast could deregulation occur in US financial markets? Comments from Fed Vice-Chair Stanley Fischer suggest some answers
While there may be some excitement in the air about US deregulation, last week Federal Reserve Vice-Chairman Dr. Stanley Fischer eviscerated critics of Dodd-Frank by saying that deregulation would be…
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