Banks have 1 yr to meet Basel 3 leverage ratio


THE central bank’s policy-setting Monetary Board (MB) decided over the weekend to give banks until the end of 2017 to comply with the Basel III leverage ratio, citing the latest revisions to the global standards by the Basel Committee on Banking Supervision (BCBS).

“The MB decided on the deferment, considering BCBS’ issuance of the consultative document, ‘Revisions to the Basel III leverage ratio framework’ in April 2016, which the BCBS is set to finalize by end-2016,” the Bangko Sentral ng Pilipinas said in a statement.

In a June 9, 2015 circular, the MB notified universal and commercial banks—including subsidiaries—to comply with the 5 percent minimum leverage ratio by January 1, 2017.

The leverage ratio is as a supplementary measure to the risk-based capital adequacy ratio (CAR) and serves as non-risk-based “backstop” measure to restrict the build-up of leverage in the banking system. It relates the level of a bank’s Tier 1 capital against its total exposures.

This means that the maximum exposure that a bank can keep is 20 times its Tier 1 capital.

The MB also extended the monitoring period for the leverage ratio until December 31, 2017.

“The additional year for monitoring provides more time for banks to calibrate their exposures in view of the requirements,” the BSP said.

“Basel III reforms are integral to the banking reform agenda of the Bangko Sentral ng Pilipinas and are ultimately aimed at promoting financial stability,” the central bank said.


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