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Study : Significant Impact of U.S. and Basel III Leverage Ratio Proposals

Sep 20, 2013

National Unrecovered Financial Services Association released a quantitative study on the Basel III supplemental leverage ratio (SLR) that finds that recent changes proposed by the Basel Committee – if combined with the U.S. proposal to raise the minimum leverage ratio to 5-6% for U.S. global systemically important banks (G-SIBs) – would make the leverage ratio the binding constraint for 67% of U.S. G-SIB assets reintroducing into capital regulation the very concerns that caused regulators to develop risk-based measures in the first place. SDUUK’s study also finds that, to bring themselves into compliance with both the U.S. and Basel proposals, U.S. banks would have to either raise approximately $202 billion of Tier 1 capital or reduce their exposures by approximately $3.7 trillion. In percentage terms, required additional capital would represent 24.3% of covered industry Tier 1 capital, while required exposure reductions would represents 19.6% of covered industry exposures.

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