2016年-EBA欧洲银行管理局_EBA-Op-2016-13_28Leverage_ratio_report29_265页_5mb

EBA Report on Leverage Ratio Requirements under Article 511 of the CRR Summary

Core Content

This report by the European Banking Authority (EBA) evaluates the leverage ratio (LR) requirements under Article 511 of the Capital Requirements Regulation (CRR), focusing on the calibration, implementation, and impact of the LR on the European banking sector. It also examines the interactions between the LR and other prudential requirements, such as the Tier 1 capital ratio and the liquidity coverage ratio (LCR), as well as its implications for risk-taking, capital cyclicality, and trade finance.

Main Objectives

• To assess the calibration of the LR and determine appropriate minimum levels.
• To evaluate the impact of the LR on the banking sector, including financing provision, risk-taking, and capital requirements.
• To examine the differences in the LR across credit institutions based on business model, size, and systemic relevance.
• To analyze the interaction of the LR with other prudential requirements.
• To investigate the effects of the LR on trade finance and the robustness of institutions.

Key Findings

1. Leverage Ratio Framework

• The LR is defined as a non-risk-based measure that requires a minimum capital to total exposure ratio.
• The LR is intended to complement risk-based capital requirements by acting as a backstop against excessive leverage.
• A 3% LR level based on Tier 1 capital is proposed as the baseline calibration, aligning with the Basel Committee on Banking Supervision (BCBS) agreement.

2. Implementation and Calibration

• The 3% LR level would impose a higher capital requirement than the risk-based Tier 1 capital requirement (8.5%) for about 33% of the analyzed credit institutions.
• The report highlights that the 3% level may not fully reflect the real impact of the LR due to the lack of consideration for Pillar 2 requirements and macroprudential buffers.
• A 3% LR would be insufficient as a supervisory backstop for about 15% of institutions at 2%, and 25% at 2.5%, implying that the LR needs to be applied more broadly.

3. Differences Across Credit Institutions

• The report classifies credit institutions into 12 business-model categories based on their activities and legal structure.
• There are significant differences in the exposure to excessive leverage (REL) across business models, sizes, and systemic relevance.
• The analysis shows that the impact of the LR varies depending on the institution's business model, with some showing higher vulnerability than others.

4. Interactions with Other Prudential Requirements

• The LR interacts with the Tier 1 capital ratio, LCR, and Net Stable Funding Ratio (NSFR).
• The LR could have a constraining effect on risk-taking, as it limits the amount of leverage institutions can maintain.
• The report suggests that the LR should function in a complementary manner with risk-based capital requirements to ensure a balanced regulatory framework.

5. Impact on Financing and Risk-Taking

• The LR may affect the ability of credit institutions to provide financing, especially to SMEs, local authorities, and trade finance.
• Simulations show that the potential reduction in exposures increases significantly beyond a 3.5% LR level.
• The report also discusses the impact of the LR on the probability of distress, indicating that it may reduce the likelihood of institutions facing financial difficulties if they increase capital and reduce leverage simultaneously.

6. Capital Cyclicality and Robustness

• The LR is expected to reduce the cyclicality of capital requirements, making the banking system more resilient to economic fluctuations.
• Empirical studies suggest that the LR can contribute to the robustness of institutions by limiting exposure and encouraging more conservative risk management practices.

Recommendations

• The EBA recommends a 3% LR level as the baseline calibration for the EU, consistent with the BCBS agreement.
• It emphasizes the need for a calibrated and proportionate approach, considering the diversity of business models and the systemic importance of institutions.
• The report calls for further analysis on the treatment of off-balance-sheet items, derivatives, and other technical aspects of the LR framework.
• It suggests that the LR should be implemented in a way that ensures its effectiveness without unduly restricting the operations of credit institutions.

Limitations and Constraints

• The report acknowledges that the timing of the analysis was constrained, limiting the depth of certain investigations.
• Some aspects of the LR, such as the treatment of cash, intragroup exemptions, and institutional protection schemes, were not fully analyzed due to data constraints and the need to focus on the core mandate.
• The results are based on a representative sample of 246 credit institutions, which accounts for approximately 75% of total banking assets in the EU.

Conclusion

The EBA report concludes that the LR, when calibrated appropriately, can serve as a useful backstop to risk-based capital requirements. The proposed 3% level is seen as a reasonable starting point, but further refinement and analysis are needed to ensure that the LR is effective and proportionate across different types of credit institutions. The report also highlights the importance of considering the broader implications of the LR on the financial system, including its impact on risk-taking, capital structure, and market stability.