This rule finalizes an April inter-agency proposal to align the definition of assets (i.e., the denominator) for the leverage ratio in accordance with the new Basel denominator. The standards apply to the supplementary leverage ratio (three percent of on- and off-balance sheet assets as measured here) for banking organizations under the U.S. Basel III advanced option. However, the definition also governs the denominator for U.S. G-SIBs under the new enhanced supplementary leverage ratio (ESLR). It includes the effective notional principal amount of credit derivatives and similar instruments providing credit protection (sold credit protection), modifies the calculation of total leverage exposure for derivative and repo-style transactions, and revises the credit conversion factors applied to certain off-balance sheet exposures. The final rule also changes the frequency with which the supplementary leverage ratios are calculated and establishes public-disclosure requirements. In sum, the new denominator increases the amount of capital required to meet these leverage standards, especially for the largest banks with significant derivatives exposures.
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