COVID-19 AWARENESS: Xcina Consulting is open and operating, as usual, and here to support organisations during these challenging times. We are available to provide risk assurance and advisory services to help navigate the challenges of the new ways of working. Contact Us
Menu Close

Enhancements to CRD V and CRR II – Basel Committee Consultation on Proposed Revisions to Leverage Ratio Disclosures closes for responses

Background

  • Implements the reforms of the Basel Committee Banking Supervision, BCSB post financial crisis
  • Sets forward significant increased capital requirements, the details of which are summarised below.

Impacts

BSB Proposals includes the introduction of:-

  • A binding net stable funding ratio (“NSFR”)
  • A binding leverage ratio of 3% Tier 1 capital
  • New market risk rules, a ‘fundamental review of the trading book’ (“FRTB”)
  • Amended counterparty credit risk rules including a new standardised approach to calculate the exposure value for derivative transactions and amendments to the rules on cleared derivative exposures, (SA-CCR)
  • Standards on the total loss-absorbing capacity (“TLAC”)
  • Changes to the rules on equity investments in funds
  • A modified framework for interest rate risk

 EU specific proposals include:- 

  • waivers from capital and liquidity requirements subject to satisfaction of certain conditions;
  • the establishment of intermediate EU parent undertakings and authorisation/direct supervision of financial holding companies;
  • the preferential treatment for infrastructure lending;
  • the extension of the risk weight reduction for exposures to small and medium sized firms; and
  • amended remuneration rules.

 Timeline

  • Revised Text currently under review with European Parliament and the European Council with effective compliance date anticipated sometime in 2020 or later.
  • Brexit will clearly have an impact here and it remains to be seen whether UK Banks will have to apply EU regulation in its entirety, the matter being wholly dependent on the current negotiating process underway.
  • In December 2018, The Basel Committee issued a consultation on Revisions to Leverage Ratio Disclosures for responses by 13th March 2019 with conclusions on revised treatment to follow in due course.