BoE consults on leverage ratio: BoE is consulting on the Financial Policy Committee (FPC) use of the leverage ratio. The proposed capital requirement framework for banks including a leverage ratio would comprise three elements:

  1. risk-weighted capital;
  2. stress-testing framework; and
  3. leverage ratio framework.

The leverage ratio would be set in proportion to exposures regardless of their risk, to guard against under-statement of risk. BoE seeks views on:

  • whether the leverage framework should mirror features of the existing risk-weighted framework;
  • whether there should be a supplementary leverage ratio component to a subset of firms, such as ring-fenced banks and/or systemically important institutions;
  • the merits of a time-varying leverage ratio component; and
  • quality of capital.

BoE asks for comments by 14 August 2014 and will report again later in the year. (Source: BoE Consults on Leverage Ratio)