In conjunction with finalizing numerous contentious aspects of the Basel III Accord, the Basel Committee has completed revisions to the global leverage-ratio (LR) standard for both all internationally-active banks and GSIBs. The new standards retain much in Basel’s prior approach (e.g., the controversial three percent LR and 2018 implementation date), but make significant changes in the way complex derivatives and similar obligations are treated in the LR denominator. Capital treatment is generally liberalized over the prior approach, although the new standards retain the earlier coverage of clearing positions and central-bank reserves that make the LR considerably more costly for many banks. The new standards also establish the GSIB leverage surcharge after the initial, vague proposal. For GSIBs outside the U.S, this LR surcharge could be another, costly element of the LR framework.
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