Leverage Ratio

The leverage ratio is a measure which allows for the assessment of institutions’ exposure to the risk of excessive leverage. It is a simple, non-risk based approach calculated as Tier 1 capital divided by the total exposure measure, consisting of both on-balance sheet and off-balance sheet items, and is supplementary to capital measures (Basel Framework – LEV). The higher the percentage, the less reliance an institution has on debt for funding. Minimum leverage ratio requirements before any buffers are applied are 3.25% in the UK and 3% in the EU.

The leverage ratio framework consists of 9 reporting templates, of which 5 are to be submitted by all firms on a quarterly basis, and an additional 4 which are only required to be submitted by LREQ firms [UK retail deposits of at least £50bn or non-UK assets (averaged over 3 accounting year ends prior to 1 Jan 2023 and rolling thereafter) of £10bn or above].

Amongst other data, the templates capture the different types of leverage ratio calculation, a detailed breakdown of the total exposure measure, and the treatment of SFTs & internalised trades.

• LV47.00: Leverage ratio calculation
• LV40.00: Alternative treatment of the exposure measure
• LV41.00: On- and off-balance sheet items – additional breakdown of exposures
• LV43.00: Alternative breakdown of total exposure measure components
• LV44.00: General information

For LREQ firms only

• LV49.00: Treatment of collateral swaps
• LV50.00: Treatment of repurchase transactions
• LV51.00: Treatment of agency repurchase transactions
• LV52.00: Treatment of internalised trades