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Bank leverage ratio could be higher says BIS paper
[LONDON] Restrictions on risk-taking at banks could be toughened without harming the economy to reduce the chance of a systemic crisis at big lenders, according to a paper published by the Bank for International Settlements (BIS) on Sunday.
BIS, the bank for central banks, published the paper in its Quarterly Review, bolstering the hawks' case for a much higher global leverage ratio just as Basel enters final negotiations.
Global regulators have agreed to impose a so-called binding leverage ratio on banks from January 2018 as an extra safeguard.
The ratio is a measure of capital to a bank's assets on a non-risk weighted basis as a cross check to a lender's core capital buffers, which are risk-related.
The ratio aims to counter any attempts by banks to flatter their risk-weightings in a bid to reduce the amount of core capital needed.