Leverage ratio requirements for global systemically important banks
This chapter describes the leverage ratio buffer requirements applying to global systemically important banks.
- Effective as of: 01 Jan 2023
- Last update: 27 Mar 2020
- Status Current
40.1
To maintain the relative roles of the risk-based capital and leverage ratio requirements, banks identified as global systemically important banks (G-SIBs) according to SCO40 must also meet a leverage ratio buffer requirement. Consistent with the capital measure required to meet the leverage ratio minimum described in LEV20.4, G-SIBs must meet the leverage ratio buffer with Tier 1 capital.
40.2
The leverage ratio buffer will be set at 50% of a G-SIB’s higher loss-absorbency risk-based requirements. For example, a G-SIB subject to a 2% higher loss-absorbency requirement would be subject to a 1% leverage ratio buffer requirement.
40.3
The design of the leverage ratio buffer is akin to the capital buffers in the risk-based framework. As such, the leverage ratio buffer will include minimum capital conservation ratios divided in five ranges. Capital distribution constraints will be imposed on a G-SIB which does not meet its leverage ratio buffer requirement.
40.4
The capital distribution constraints imposed on G-SIBs will depend on the G-SIB’s Common Equity Tier 1 (CET1) risk-based ratio and its leverage ratio. A G-SIB which meets both its CET1 risk-based capital requirements (defined as a 4.5% minimum requirement, a 2.5% capital conservation buffer, the G-SIB higher loss-absorbency requirement and countercyclical capital buffer if applicable) and its Tier 1 leverage ratio requirement (defined as a 3% leverage ratio minimum requirement and the G-SIB leverage ratio buffer) will not be subject to minimum capital conservation standards. A G-SIB which does not meet one of these requirements will be subject to the associated minimum capital conservation standards. A G-SIB which does not meet both requirements will be subject to the higher minimum capital conservation standard related to its risk-based capital requirement or leverage ratio.
40.5
As an example, the table below shows the minimum capital conservation standards for the CET1 risk-based requirements and Tier 1 leverage ratio requirements of a G-SIB in the first bucket of the higher loss-absorbency requirements (ie where a 1% risk-based G-SIB capital buffer applies).
| CET1 risk-based ratio | Tier 1 leverage ratio | Minimum capital conservation ratios (expressed as a percentage of earnings) |
| 4.5%–5.375% | 3%–3.125% | 100% |
| > 5.375%–6.25% | > 3.125%–3.25% | 80% |
| > 6.25%–7.125% | > 3.25%–3.375% | 60% |
| > 7.125%–8% | > 3.375%–3.50% | 40% |
| > 8.0% | > 3.50% | 0% |
This standard describes the scope of application of the Basel Framework.
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