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This chapter describes how to calculate the leverage ratio and the minimum requirements.

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Effective as of: 01 Jan 2022 | Last update: 15 Dec 2019
Status: Forthcoming (View changes)

The Basel III leverage ratio is intended to:


restrict the build-up of leverage in the banking sector to avoid destabilising deleveraging processes that can damage the broader financial system and the economy; and


reinforce the risk-based capital requirements with a simple, non-risk-based “backstop” measure.


The Basel Committee is of the view that a simple leverage ratio framework is critical and complementary to the risk-based capital framework and that the leverage should adequately capture both the on- and off-balance sheet sources of banks’ leverage.


The leverage ratio is defined as the capital measure (the numerator) divided by the exposure measure (the denominator), with this ratio expressed as a percentage:


The capital measure for the leverage ratio is Tier 1 capital – comprising Common Equity Tier 1 and/or Additional Tier 1 instruments – as defined in CAP10. In other words, the capital measure used for the leverage ratio at any particular point in time is the Tier 1 capital measure applicable at that time under the risk-based framework. The exposure measure for the leverage ratio is defined in LEV30.


A bank’s total leverage ratio exposure measure is the sum of the following exposures, as defined in LEV30:1


on-balance sheet exposures (excluding on-balance sheet derivative and securities financing transaction exposures);


derivative exposures;


securities financing transaction exposures; and


off-balance sheet items.

1 Footnote

Both the capital measure and the exposure measure are to be calculated on a quarter-end basis. However, banks may, subject to supervisory approval, use more frequent calculations (eg daily or monthly averaging) as long as they do so consistently.


Banks must meet a 3% leverage ratio minimum requirement at all times.