Reserving judgement: the BoE’s divisive leverage ratio plan

Central bank reserves exemption may squeeze interbank liquidity, raise capital requirements

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It all sounded so easy. Amid growing industry complaints about rising capital requirements, the Bank of England (BoE) decided to pull a rabbit out of the hat, and exempt central bank reserves from the leverage ratio, offering an estimated £11 billion ($13.4 billion) capital saving for the seven UK banks that are subject to the rules. The argument was that charging capital for money parked at a central bank would deter the industry from using central bank liquidity facilities, potentially

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