Bank capital reforms would be incomplete absent a new and enhanced leverage ratio requirement, Federal Deposit Insurance Corp Director Jeremiah O. Norton, told the Florida Bankers Association Orlando. He suggested that regulators should consider establishing higher minimum leverage ratios based on high-quality tangible capital relative to a bank's total assets.
While acknowledging the use of the leverage ratios established under Basel III, Director Norton pointed out a number of its shortcomings, and added that achieving Tier 1 leverage ratio of 3 percent would not be a significant reform.
The Basel Committee’s global non-risk based leverage ratio, set at (i.e. a bank’s total assets cannot exceed 33 times the bank’s capital), was introduced (and will phase in by 2018) in order to help contain the buildup of excessive leverage in the financial system, with the intention to serve as a backstop to the risk-based regime and safeguard against banks' attempts to manipulate the risk-based
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