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UPDATE: BoE Sets Leverage Ratio at 4.05% for Biggest U.K. Banks

October 31, 2014 10:03 AM EDT

(Updated - October 31, 2014 10:13 AM EDT)

Bank of England sets leverage ratio at 4.05 percent for biggest U.K. banks, according to Bloomberg headlines.

UPDATE - The following is item number 27 from the BofE's FP meeting, which was held on October 15th. The full report is embedded below.

Before confirming its view on the appropriate calibration, the Committee reviewed the range of leverage ratios that could result from a 3% minimum requirement and buffers set at 35% of the relevant risk-weighted requirements:

  • For UK systemically important firms, the internationally agreed risk-weighted capital buffers for G-SIBs would currently range when implemented from 1% to 2.5%. So using a 35% scaling factor would result in a systemic leverage buffer of between 0.35pp and 0.875pp - and so a requirement, before any CCLB, of between 3.35% to 3.875% for G-SIBs.
  • The risk-weighted supplementary capital buffer for large domestic UK banks and building societies, including ring-fenced banks, had not been set yet but would be in the range of 0% to 3%. Using a 35% scaling factor would imply a systemic leverage ratio buffer of up to 1.05pp for these firms ¡V and so a leverage ratio requirement, before any CCLB, of between 3% and 4.05%.
  • For the CCLB, using the Basel buffer guide range for the CCB of 0% to 2.5% would result in a CCLB of 0% to 0.9% (the Committee proposed to round the CCLB to the nearest 10 basis point increment) ¡V though as the FPC had set out in the Records of its meetings in June and September, the buffer guide would be only one input to its decisions on the appropriate CCB rate and so the CCB rate could be higher.



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