Basel Committee Throws a Huge Monkey WrenchThe Basel Committee on Banking Supervision (BCBS) in June made several proposals for changes to the calculation of the denominator for the supplementary Basel III leverage ratio, complicating banks' understanding of just which off-balance-sheet assets will be included, how low their leverage ratios might go, and how much capital they must build up or assets they must shed to comply with the rules. The Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. didn't determine whether or not they would adopt the BCBS proposal for calculating the leverage ratio. The comment period for the proposed rules ends on Oct. 21. "We estimate that leverage ratios would fall ~45 bps on average if the proposed
- Wells Fargo's supplementary Basel III Tier 1 leverage ratio of 7.0% as of June 30, under federal regulators' proposed rules. Under the BCBS proposal for changing the leverage ratio calculation, Horowitz estimates the company's supplementary Basel III Tier 1 leverage ratio would decline slightly to 6.9%.
- State Street's June 30 leverage ratio was 5.4%; under the proposed BCBS calculation change, the ratio would drop to 4.8%.
- Bank of America's leverage ratio was 5.0% as of June 30. Under the proposed BCBS calculation change, the leverage ratio would decline to 4.6%.
- JPMorgan Chase's June 30 leverage ratio was 4.7%; under the BCBS proposal, the ratio would decline to 4.3%.
- Bank of New York Mellon's leverage ratio was 4.0% as of June 30. The ratio would be unchanged under the BCBS proposal.