Regulation: EU-US tensions remain over leverage ratio

US officials are waging a war to promote the leverage ratio as a binding constraint on banks’ capital frameworks, further imperilling strategic planning for cross-border lenders.

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Six years after the global financial crisis, policymakers, mandated to end taxpayer-funded bank-bailouts, remain divided over the basic pillar of bank-regulation: which capital requirement best measures and caps risk.

The Basel Committee argues that risk-based capital guidelines for banks, which allow a bank to adjust its ratio of capital according to perceived risk, should be supplemented by a leverage ratio, a non-risk based measure of a bank’s capitalization.

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