Data on the value of the Leverage Ratio as the simplest, most straight-forward risk measurement tool

New data produced by bank news service and consulting firm SNL Financial shows an apples to apples comparison of bank leverage ratios, and gives further steam to the Bank of England’s Andrew Haldane’s initial call, since echoed by two US Senators and other parties, to dramatically simplify bank capital rules. The data show Leverage Ratios for G-SIBs. The interesting part about this is that SNL has normalized the data across GAAP and IFRS. Let’s take a look.

SNL Q3 2012 Leverage Ratios

Here’s how SNL has normalized the data: “To overcome the differences between GAAP and IFRS, SNL adjusts the latter by netting derivative assets against liabilities. This reflects the complex differences between accounting standards. IFRS allows far less netting off while GAAP allows so-called master netting agreements, which are, in practice, more generous. The [European Banking Authority’s Dec 20, 2012] calculations similarly reflect derivatives.”

In particular the normalized data show the strength of the big US banks relative to European banks. If the Basel Committee is looking for a one-size fits all approach to risk management, this type of normalized dataset might be it. It’s pretty straight-forward and the data appear to line up nicely.

The full SNL article is here. The article discusses additional improvements in UBS’s and Credit Suisse’s Leverage Ratios from Dec 2011 to Q3 2012.

Related Posts

Previous Post
Clearstream and 360T cooperate to launch pioneering triparty repo service for corporate and institutional clients
Next Post
Who is building the best collateral management network? (Finadium subscribers only)

Fill out this field
Fill out this field
Please enter a valid email address.

X

Reset password

Create an account