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:
- risk-weighted capital;
- stress-testing framework; and
- 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)