FINANCIAL TIMES: …A new “leverage ratio” will force the eight largest US banks to hold a minimum of 5 per cent equity to total assets to absorb losses in a crisis and proposes adopting a more stringent way of calculating the rule.
The leverage ratio is supposed to be a backstop to other capital rules that are “risk-weighted”. It does not allow banks to use their own models, which some critics have warned allows institutions to game the system.
It is tougher than a new international metric that requires banks to reach a 3 per cent minimum of equity to assets and potentially hinders the profitability of the eight banks affected – Bank of America, Bank of New York Mellon, Citigroup, Goldman, JPMorgan, Morgan Stanley, State Street and Wells Fargo – compared with their rivals in Europe… (more)
