Stellungnahme DK zu Leverage Ratio in follow-up to the LCR-LR-Hearing of the EU-Commission on 10 March 2014
Because of its limited meaningfulness in relation to the indebtedness and stability of financial institutions we continue to be basically negatively disposed to the leverage ratio. In this regard, even further specification of the rules to calculate the leverage ratio seem little suited to enhance its meaningfulness.
The final Basel paper includes a number of stringent tightening up measures compared with the position of Basel III in 2010, e.g. with regard to taking into account the netting of credit derivatives and SFTs (particularly repo transactions), which we reject.
The tried and tested, internationally uniformly applied and legally enforceable regulatory netting rules are now simply to be accepted with considerable restrictions. There are no factual reasons why the effect of netting would have to be treated differently here than for the purposes of calculating capital adequacy under CRR. This differentiation leads to misdirected incentives, additional costs, increased complexity and unnecessary additional work. We therefore advocate maintaining the current netting rules in the CCR. In view of the restrictive conditions for application, also the final Basel rules for offsetting cash variation margins and the exemption of derivative clearing appear to us to be difficult in practice. It is, for example, thus not compatible with the conventional Master Netting Agreements to include Cash Variation Margins in the same settlement currency.
The EBA’s own-initiative report published at the beginning of March on the effects of the different definitions of the Basel requirements and European regulations on the leverage ratio is purportedly based on a data basis characterised by estimates and assumptions. In our opinion, adequate data quality is essential for the discussion on which regulations are appropriate at a European level too. The EBA report, furthermore, is not clear on which assumptions the ratio survey was based. We believe that the transposition of international regulations into European law will require a differentiated approach that takes into account the particularities of the European banking system. While BCBS 270 the Basel Committee rightly bases the calculation of the ratio on the regulatory scope of consolidation and thus corrects a material structural error of the leverage ratio, the requirements for dealing with the SFTs, in particular, result in a significant increase of the measure of exposure (denominator of the leverage ratio) and thus, under otherwise similar conditions, to a considerable capital requirement. […]