Basel III International Banking Framework
Leverage ratio (LEV) – Basel III International Banking Framework

Basel III International Banking Framework LEV10-30: Maintain a Tier 1 leverage ratio of at least 3% on a correctly measured exposure base

The bank must calculate the leverage ratio on the same scope of consolidation as the risk-based framework, including only the investment in unconsolidated entities (LEV10.1-10.2). The ratio is Tier 1 capital divided by the total exposure measure, expressed as a percentage (LEV20.3-20.4), and the bank must meet a 3% minimum at all times (LEV20.7). Both measures are computed at quarter end, or with approved and consistently applied more frequent averaging (LEV20.6). The exposure measure sums on-balance sheet, derivative, SFT and off-balance sheet exposures (LEV20.5), following gross accounting values without netting or collateral reduction unless permitted (LEV30.1-30.2); liability items must not be deducted (LEV30.4). Derivatives use 1.4 times replacement cost plus PFE, with the PFE multiplier fixed at one, eligible cash variation margin reducing only replacement cost, and walkaway clauses excluded from netting (LEV30.13-30.25). Written credit derivatives add effective notional (LEV30.30-30.35). SFTs include gross assets plus counterparty exposure, with netting only under qualifying agreements (LEV30.37-30.39). Off-balance sheet items use CCFs of 100%, 50%, 40%, 20% and 10% (LEV30.49-30.55). Jurisdictions exempting central bank reserves must raise the minimum commensurately (LEV30.7).

Maintained by Gerard BlokdykVerified against the published standard Control text last updated

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  • P16 Principle 16: capital adequacy

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