Basel Proposes New Leverage Ratio Disclosure Requirements

In a bid to prevent what it calls “window-dressing,” a form of regulatory arbitrage around disclosure deadlines, the Basel Committee on Banking Supervision has proposed revisions to its disclosure framework for the Basel III leverage ratio. The committee said it wants to prevent “temporary reductions of transaction volumes in key financial markets around reference dates resulting in the reporting and public disclosure of elevated leverage ratios.”

To that end, the consultative document issued yesterday proposes that internationally active banks disclose additional figures in their Pillar 3 disclosures: adjusted gross securities financing transaction assets recognized for accounting purposes; replacement cost of derivative exposures; and central bank reserves that are included in on-balance sheet exposures. Each would be calculated based on an average of daily values over the quarter. The committee added that it is considering additional capital and disclosure requirements as well.

If adopted, the proposed requirements would be expected to be implemented by Jan. 1, 2022. Comments on the consultative document are due by March 13, 2019.