THE EUROPEAN COMMISSION,
Having regard to the Treaty on the Functioning of the European Union,
Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012(1), and in particular Article 456(1)(j) thereof,
Whereas:
(1) The leverage ratio calculated in accordance with Article 429 of Regulation (EU) No 575/2013 is to be disclosed by institutions from 1 January 2015 onwards and before that date, the Commission is empowered to adopt a delegated act amending the exposure and capital measure for calculating the leverage ratio to correct any shortcomings detected on the basis of reporting by institutions.
(2) Differences have been observed in the reported leverage ratios referred to in Article 429(2) of Regulation (EU) No 575/2013 due to diverging interpretation by institutions of the netting of collateral in securities financing and repurchase transactions. These differences in interpretation and reporting have become manifest following the analytical report published on 4 March 2014 by the European Banking Authority (EBA).
(3) Given that the provisions of Regulation (EU) No 575/2013 mirrored those of the Basel standards, the solutions found to the shortcomings of the Basel rules are also fit for the purpose of addressing the corresponding shortcomings of the relevant provisions of that Regulation.
(4) The Basel Committee adopted on 14 January 2014 a revised rules text on the leverage ratio with in particular additional measurement and netting arrangements for repurchase transactions and securities financing transactions. Alignment of the provisions of Regulation (EU) No 575/2013 concerning the calculation of the leverage ratio with the internationally agreed rules should address diverging interpretations by institutions for the netting of collateral of securities financing and repurchase transactions and should also enhance international comparability as well as create a level playing field for institutions that are established in the Union and operate internationally.
(5) Clearing via central counter parties under the principal model commonly used in the Union creates a double counting of leverage in the exposure measure of an institution acting as a clearing member.
(6) Clearing of securities financing transactions, especially repurchase transactions, through qualifying central counterparties (QCCPs) can bring advantages such as multilateral netting and robust collateral management processes which enhance financial stability. Cash receivables and payables for repurchase and reverse repurchase transactions via the same QCCP should therefore be allowed to be netted.
(7) Repurchase transactions that can be terminated at any day subject to an agreed recall notice period should be considered equivalent to having an explicit maturity equal to the recall notice period and the ‘same explicit final settlement date’ should be deemed to be met so that such transactions are eligible for the netting of cash receivables and payables of repurchase transactions and reverse repurchase transactions with the same counterparty.
(8) The revised leverage ratio should lead to a more accurate measure of leverage and should serve as a proportionate constraint on the accumulation of leverage in institutions established in the Union.
(9) Point in time reporting of the leverage ratio at the end of the quarterly reporting period rather than reporting on the basis of a three-month average better aligns the leverage ratio with solvency reporting.
(10) Using gross notional amounts for written credit protection issued by an institution more appropriately reflects leverage as compared to using the mark to market method for those instruments.
(11) The scope of consolidation for calculating the leverage ratio should be aligned with the regulatory scope of consolidation used for determining the risk weighted capital ratios.
(12) The changes introduced by this Regulation should lead to better comparability of the leverage ratio disclosed by institutions and should help to avoid misleading market participants as to the real leverage of institutions. It is therefore necessary that this Regulation enters into force as soon as possible.
(13) Regulation (EU) No 575/2013 should therefore be amended accordingly,
HAS ADOPTED THIS REGULATION: