{"id":53419,"date":"2016-06-22T00:34:00","date_gmt":"2016-06-21T22:34:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/sp-global-market-intelligence-leverage-ratios-underscore-challenge-of-basels-risk-weight-proposals\/"},"modified":"2019-12-31T00:51:37","modified_gmt":"2019-12-30T23:51:37","slug":"sp-global-market-intelligence-leverage-ratios-underscore-challenge-of-basels-risk-weight-proposals","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/sp-global-market-intelligence-leverage-ratios-underscore-challenge-of-basels-risk-weight-proposals\/","title":{"rendered":"S&#038;P Global Market Intelligence: Leverage ratios underscore challenge of Basel&#8217;s risk-weight proposals"},"content":{"rendered":"<p>Large yet ostensibly low-risk mortgage books mean that Swedish lenders, for example, have high common equity Tier 1 ratios, which are based on risk-weighted assets, but relatively weak leverage ratios, which are based on total assets.<\/p>\n<p>Relative to U.S. peers, European lenders demonstrate generally lower leverage ratios, as U.S. banks benefit from differing treatment of off-balance-sheet exposures, the transfer of mortgage exposure to government-sponsored Fannie Mae and Freddie Mac and the tendency of U.S. corporations to fund themselves in the capital markets.<\/p>\n<p>Unsurprisingly, European banks prefer the risk-based approach to measuring capital strength and largely consider the leverage ratio &#8220;<em>a backstop<\/em>&#8221; to the CET1 ratio. The European Banking Authority requirement is at 3% and widely expected to rise to 4%. <\/p>\n<p>With a handful of exceptions, the major European banks already exceed the 4% threshold. Yet they face further pressure as the Basel Committee weighs changes to risk-weighting rules, including minimum weights for mortgage lending. <\/p>\n<p>In addition to the Swedish banks, Dutch lenders including ABN AMRO Group NV could struggle here. Loan-to-value ratios on Dutch mortgages are the highest in the eurozone, leaving them highly exposed to potential risk-weighting changes. ABN AMRO reported a leverage ratio of 3.7% at the end of the first quarter, yet has strengthened its capital notably during the past year and has one of the European cohort&#8217;s highest CET1 ratios.  <\/p>\n<p><img loading=\"lazy\" class=\" aligncenter size-full wp-image-53417\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20.gif\" alt=\"s_p_20.gif\" align=\"center\" width=\"515\" height=\"740\" \/><br \/>\n<div id='gallery-1' class='gallery galleryid-53419 gallery-columns-3 gallery-size-herald-lay-c1'><figure class='gallery-item'>\n\t\t\t<div class='gallery-icon portrait'>\n\t\t\t\t<a class=\"herald-popup\" href='http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20.gif'><img width=\"470\" height=\"313\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20-470x313.gif\" class=\"attachment-herald-lay-c1 size-herald-lay-c1\" alt=\"\" loading=\"lazy\" srcset=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20-470x313.gif 470w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20-300x200.gif 300w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20-414x276.gif 414w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20-130x86.gif 130w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2016\/06\/s_p_20-187x124.gif 187w\" sizes=\"(max-width: 470px) 100vw, 470px\" \/><\/a>\n\t\t\t<\/div><\/figure>\n\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>European banks are generally well-capitalized under their favored risk-weighted approach, but leverage ratios show the scale of the potential challenge from the Basel Committee&#8217;s latest proposals.<\/p>\n","protected":false},"author":20,"featured_media":53417,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1671,1651,1437,2103],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/53419"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/20"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=53419"}],"version-history":[{"count":1,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/53419\/revisions"}],"predecessor-version":[{"id":53420,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/53419\/revisions\/53420"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/53417"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=53419"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=53419"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=53419"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}