On 11 January 2016, the Basel Committee on Banking Supervision (BCBS) issued a press release informing the public about the agreement reached by its oversight body, the Group of Governors and Heads of Supervision (GHOS), according to which a minimum level of 3% based on Tier 1 capital is expected to apply for the leverage ratio (LR) from 1 January 2018 onwards. Furthermore, the GHOS discussed additional requirements for institutions which are systemically important at the global level, and the details of such additional requirements are part of a public consultation by the BCBS.

In order to inform an appropriate review and calibration of the LR, Article 511 of the Capital Requirements Regulation contains a mandate for the European Banking Authority (EBA) to submit a detailed report on the matter to the European Commission (Commission) by 31 October 2016.

The EBA has now published a report on the impact assessment and calibration of the LR which fulfils the mandate and the call for advice from the Commission. In particular the report focuses on the high-level calibration of LR levels and on the impact of imposing these requirements on the banking system. The report also provides an analysis of and content relating to a range of more detailed / technical aspects of the LR calculation rules.

In summary, the analysis in the report suggests that the potential impact of introducing a LR requirement of 3% on the provision of financing by credit institutions would be relatively moderate, while, overall, it should lead to more stable credit institutions.

By 31 December 2016, the Commission is to submit a report on the impact and effectiveness of the LR to the European Parliament and the Council of the European Union.

View EBA report on EU leverage ratio, 3 August 2016