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Leverage ratio needs omissions, say associations 

July 11, 2016

Drew Nicol, Securities Lending Times

Five financial industry associations have joined forces to express their strong concern about the implications of including central bank cash balances within Basel III’s leverage ratio framework.

The warning came in a joint statement from five associations, including the International Swaps and Derivatives Association (ISDA).

They also all submitted comment letters in response to the Basel Committee on Banking Supervision’s (BCBS) consultation on revisions to the Basel III leverage ratio framework, which was issued in April. The BCBS hopes to complete the review by the end of the year.

The associations noted and echoed the sentiments of the Bank of England’s Financial Policy Committee, which raised its the same concern with the leverage ratio framework in its review on 5 July.

All five associations reiterated their support for the BCBS’s broad aims to mitigate market risk and boost transparency, but also highlighted the need to expand the scope of the BCBS’s review and “carefully consider the way cash and unencumbered cash equivalent assets are treated in the leverage ratio”. Read more

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