In conjunction with final action on the enhanced supplementary leverage ratio for the very largest U.S. banking organizations, the federal banking agencies have proposed to rewrite the denominator included in that rule to conform it more closely to the definition of exposures for leverage purposes recently finalized by the Basel Committee.  However, this denominator would apply not just to the biggest banks, but also to all U.S. banking organizations using the final U.S. Basel III advanced approaches, which implement a three percent supplementary leverage ratio for on- and off-balance sheet assets for BHCs and banks with assets above $250 billion and some other affected banks.  The proposed rule would incorporate in total leverage exposure the effective notional principal amount of credit derivatives and similar instruments through which credit protection is sold, modify the calculation of total leverage exposure for derivatives and repo-style transactions, and revise the credit conversion factors (CCFs) applied to certain off-balance sheet exposures. The proposed rule also would make changes to the methodology for calculating the supplementary leverage ratio and to public disclosure requirements. It would generally increase the leverage requirement for large banking organizations and hike it considerably for some of the very largest banks.

The full report is available to retainer clients. To find out how you can sign up for the service, click here