“In speaking about the leverage ratio, an extremely important bank capital requirement, Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corporation, said: ‘I think we’ve got the details worked out. Now it’s just getting the schedule.’”
“His comments on Monday at a National Association for Business Economics conference are the biggest hint that United States banking regulators have finalized and will soon announce a proposed leverage ratio for banks that was released for comment last July.”
“The Federal Deposit Insurance Corporation has proposed the ratio at 5 percent for bank holding companies and 6 percent for insured bank depositories, Most important, only high quality capital such as common equity and retained earnings would count for the numerator.”
“While the United States has long had a leverage ratio of 4 percent, the denominator covered only on-balance sheet assets; the new leverage ratio’s denominator would cover all assets and off-balance sheet transactions such as derivatives. For banks like JPMorgan Chase, which have about $2 trillion in assets but $70 trillion in notional amount of off-balance sheet derivatives, the impact of the new leverage ratio will be significant.”
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