Basel 3’s new market risk framework and leverage ratio requirements endorsed


The Basel Committee’s governing body has endorsed Basel 3’s new market risk framework and leverage ratio requirements.

“Notable improvements in the new risk framework, which takes effect in 2019, include:

– A revised boundary between the banking and trading books that will reduce scope for arbitrage;

– A revised internal models approach with more coherent and comprehensive risk capture;

– An enhanced model approval process and more prudent recognition of hedging and portfolio diversification; and

– A revised standardised approach that serves as a credible fall-back and floor to the model-based approach, and facilitates more consistent and comparable reporting of market risk across banks and jurisdictions.


The [Group of Central Bank Governors and Heads of Supervision (GHOS)] also discussed the final design and calibration of the leverage ratio. Members agreed that the leverage ratio should be based on a Tier 1 definition of capital and should comprise a minimum level of 3%, and they discussed additional requirements for global systemically important banks.”

Read the full press release here.

Corporate deposit market looks set for fragmentation

The new Basel liquidity and leverage rules are making banks turn away corporate deposits, the Financial Times reports.

ef78bcc0-7c40-49ac-9d71-93ea199458ed“Not only have banks found it increasingly difficult to make a decent return on the deposits amid size zero central bank rates; new post-crisis rules on capital and liquidity have compounded the challenge. Under the so-called liquidity coverage ratio (LCR), corporate deposits, particularly those from other financial institutions, are deemed so flighty that they carry little or no value.”

Read the full story here.