Leverage Ratio | KPMG | ZA

Leverage Ratio

Leverage Ratio

The Leverage Ratio (“LCR”) was introduced with the implementation of Basel III. The Basel Committee published the framework (PDF 345KB)  initially in December 2010 and subsequently a revised version was issued in June 2011. The South African Reserve Bank (“SARB”) implemented the Basel III regulations from December 2012.

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The Leverage is required in order to:

  1. prevent the build-up of excessive on-balance-sheet and off-balance-sheet leverage in banks and banking groups; and
  2. mitigate the risks associated with deleveraging that may occur during a period of market uncertainty, such as the amplification of downward pressure on asset prices, material declines in bank capital and contraction in credit availability that may damage the broader financial system and the economy, banks should calculate a non-risk-based leverage ratio, to supplement the bank or controlling company’s risk-based capital requirements.

 

 

 

 

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