Leverage Ratio framework less draconian than feared
The FPC announcement today demonstrates that they have heard and responded to some of the multiple concerns that have been expressed about the impact of a high leverage ratio introduced early, particularly on areas such as mortgage availability and price.
The framework that the FPC is recommending to HM Treasury is less draconian than we had feared, although certain elements such as the change from Total Tier 1 capital to CET1 plus a small proportion of AT1 remain unwelcome.
It is not new news that the systemic firms are expected to meet a 3% ratio. In our submission we called for any leverage ratio for the remainder of the banking sector to be introduced in line with the Basel 3/EU timetable and this is what has been announced.
A copy of the FPC announcement and the exchange of letters between the Governor of the Bank of England and the Chancellor can be found here.
