How to fix the leverage ratio (by a prudential regulator)

“Embarrassing … ridiculous”: unnamed regulator lets fly at leverage rules

risk-0815-secret-regulator2
Risk is withholding the identity of the secret regulator – expect some candid views

The Basel III leverage ratio does some things well. For example, it seems to be a reasonably good way of covering the business risks of banks entering into derivatives contracts as principal to that trade.

But it does other things so badly that one would like to think the Basel Committee on Banking Supervision was simply not aware of the problems it would cause. Specifically, it makes no sense to apply the ratio in the context of the derivatives trades a bank will execute on an agency basis

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Register

Want to know what’s included in our free membership? Click here

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here