EBA欧洲银行-EBA-Leverage-ratio-analytical-report_39页_897kb

Summary of the Report on Impact of Differences in Leverage Ratio Definitions

Core Content

This report provides a policy analysis and quantitative impact assessment of aligning the leverage ratio exposure measure in the Capital Requirements Regulation (CRR) with the Basel III standard. The EBA conducted the analysis using data from EU institutions as of 30 June 2013 to inform the EU Commission about potential amendments to the CRR leverage ratio definitions, particularly in the context of the delegated act under Article 456(1)(j) of the CRR.

The report highlights the differences in the treatment of several components of the leverage ratio exposure measure, including Securities Financing Transactions (SFTs), off-balance sheet items (OBS), written credit derivatives, cash variation margin (CVM), and consolidation scope. It also discusses the methodology used, data quality, and the implications of these differences on the leverage ratio.

Main Points

Key Definitions and Frameworks

• Basel III introduces a leverage ratio based on the Basel Committee on Banking Supervision (BCBS) framework, which includes:
  • A measure of accounting (cash) payables and receivables, subject to netting criteria.
  • A counterparty credit risk add-on, reflecting over-collateralisation.
• CRR implements a similar framework but includes some divergences, especially in the treatment of SFTs, which are subject to different interpretations.

Two Interpretations of SFT Treatment in CRR

• Interpretation 1: SFT exposures are calculated based solely on Article 429(9) of the CRR, without including accounting values.
• Interpretation 2: Accounting values of SFTs are included in addition to the exposure amounts from Article 429(9) CRR. This interpretation is closer to the Basel III approach.

Quantitative Impact

• The average leverage ratio for Group 1 banks is:
  • 3.3% under Basel III.
  • 3.3% under CRR SFT interpretation 1.
  • 3.1% under CRR SFT interpretation 2.
• The average leverage ratio for Group 2 banks is:
  • 3.9% under Basel III.
  • 3.9% under CRR SFT interpretation 1.
  • 3.8% under CRR SFT interpretation 2.
• The overall quantitative impact of applying CRR definitions instead of Basel III is not clear-cut, and is primarily driven by the treatment of SFTs and off-balance sheet items (OBS).

Percentage Changes in Leverage Ratio Exposure Measure

• Credit conversion factors for off-balance sheet items: +6.5% for Group 1, +3.8% for Group 2.
• Treatment of cash variation margin: +1.7% for Group 1, +0.9% for Group 2.
• Consolidation scope: +1.4% for Group 1, +0.1% for Group 2.
• Treatment of written credit derivatives: -2.9% for Group 1, -0.6% for Group 2.
• Securities Financing Transactions:
  • Under interpretation 1: -7.9% for Group 1, -3.2% for Group 2.
  • Under interpretation 2: +0.6% for Group 1, +0.2% for Group 2.
• Overall percentage change:
  • Under interpretation 1: -0.5% for Group 1, +0.9% for Group 2.
  • Under interpretation 2: +7.5% for Group 1, +4.3% for Group 2.

Key Observations

• The CRR leverage ratio exposure measure is larger (and therefore leverage ratios are lower) than under Basel III for most banks, regardless of the SFT interpretation.
• The impact of differences in treatment is more subtle for cash variation margin, written credit derivatives, and consolidation scope, but material for individual banks.
• The EBA recommends aligning the CRR with Basel III, particularly for SFTs, as interpretation 2 is more prudent and closer to the Basel III treatment.
• The application of the Original Exposure Method (OEM) is not quantified due to insufficient data, and will be reviewed in a future report.

Methodology and Data

• The data used for analysis was collected from 173 EU institutions (41 Group 1 banks and 132 Group 2 banks) across 18 countries as of 30 June 2013.
• The data was gathered for Basel III monitoring, and the CRR leverage ratio template was the only one that included EU-specific definitions.
• Data quality was generally sufficient, but issues were identified, particularly in the reporting of derivatives, cash collateral, and SFTs.
• The analysis is based on static balance sheet assumptions, and does not reflect the effects of banks' management decisions after the reporting date.

Policy Recommendations

• The EBA recommends aligning the CRR with Basel III in terms of the definitions of the leverage ratio exposure measure, including the treatment of written credit derivatives.
• The EU Commission is advised to consider the recommendations in this report when drafting the delegated act under Article 456(1)(j) of the CRR.
• In the event that the EU Commission does not align the treatment of SFTs with Basel III, the EBA suggests clarifying the current CRR treatment in accordance with interpretation 2, as it is more prudent and closer to the Basel III framework.

Conclusion

• The report concludes that CRR leverage ratios are broadly in line with, or possibly slightly higher than, those calculated under Basel III, particularly when interpretation 2 is applied.
• However, the analysis does not provide a definitive conclusion on the use of the OEM, and further studies are required.
• The EBA does not recommend divergence from the BCBS framework, as no EU-specific reasons were found to justify such a change.