Global regulators expected to ease banking leverage rule: source

Tue Dec 3, 2013 1:05pm EST
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By Huw Jones

LONDON (Reuters) - Global banking regulators are expected to ease a new capital rule due in 2018 to rein in risky balance sheets after U.S. complaints, two regulatory and banking sources said on Tuesday.

It marks the latest move by regulators to ease up on bank capital rules in a bid to encourage lenders to keep credit flowing to companies and the broader economy.

The Basel Committee on Banking Supervision published a proposal in June to flesh out a leverage ratio that banks will have to introduce in January 2018.

It measures a bank's capital against all of its assets, without adjusting them for risk, and act as a backstop to a lender's core risk-weighted capital requirements.

The ratio has been set at 3 percent, meaning a bank must hold capital equivalent to 3 percent of its total assets.

A key issue for Basel was how to square accounting systems that vary in the way they treat derivatives.

U.S. accounting rules allow for estimating derivatives holdings on a net basis, while international standards used in Europe and elsewhere use gross positions, which can be much larger and push lenders to hit the 3 percent mark much more quickly.

Holdings of derivatives at Deutsche Bank (DBKGn.DE: Quote) for example, appear much larger than at JPMorgan (JPM.N: Quote).   Continued...

The headquarters of Deutsche Bank are pictured in Frankfurt October 29, 2013. REUTERS/Ralph Orlowski