Basel Committee Endorses Proposals on a Common Definition of the Leverage Ratio and Changes to the Net Stable Funding Ratio
| Date Published | 1/23/2014 |
| Author | Marja Hoek-Smit |
| Theme | Housing Finance Policy |
| Country |
January 12, 2014
The Basel
Committee on Banking Supervision (BCBS) published several new proposals on the
Basel III framework. It published a consultative document on the net stable funding ratio (NSFR)
together with proposals on the liquidity
coverage ratio and disclosure requirements.
The BCBS
expressed concerns about a trade-off between the goal of achieving financial
stability and encouraging bank intermediation.
The BCBS
relaxed the liquidity coverage ratio (LCR) minimum requirement posted in January
2013 -- the minimum threshold is set at 60% instead of 100% in the January 2013
guidance. The LCR will be phased in between January 2015 and 2019, rising in
equal 10-percentage-point steps per year to 100% in 2019. Link to summary report
In a separate report about the Net Stable Funding Ratio the BCBS defines
the “Available amount of stable funding”
numerator of the net stable funding ratio, which is to be implemented in 2018, and
which is also less stringent than in the 2010 proposal – for example, from a 10
percent ratio to stable demand deposits to 5 percent in the current proposal. Some
items under “Required amount of stable
funding” in the denominator of the ratio have also been relaxed. However, unencumbered residential mortgages with a
residual maturity of one year or more that would qualify for a 35 percent or
lower risk weight under the Basel II standardized approach for credit risk are
now assigned a 65 percent risk weight. Link to Report on Net Stable Funding Ratio