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Article 429 - Calculation of the leverage ratio

Article 429

Calculation of the leverage ratio

1.  
Institutions shall calculate their leverage ratio in accordance with the methodology set out in paragraphs 2, 3 and 4.
2.  
The leverage ratio shall be calculated as an institution's capital measure divided by that institution's total exposure measure and shall be expressed as a percentage.

Institutions shall calculate the leverage ratio at the reporting reference date.

3.  
For the purposes of paragraph 2, the capital measure shall be the Tier 1 capital.
4.  

For the purposes of paragraph 2, the total exposure measure shall be the sum of the exposure values of:

(a) 

assets, excluding derivative contracts listed in Annex II, credit derivatives and the positions referred to in Article 429e, calculated in accordance with Article 429b(1);

(b) 

derivative contracts listed in Annex II and credit derivatives, including those contracts and credit derivatives that are off-balance-sheet, calculated in accordance with Articles 429c and 429d;

(c) 

add-ons for counterparty credit risk of securities financing transactions, including those that are off-balance-sheet, calculated in accordance with Article 429e;

(d) 

off-balance-sheet items, excluding derivative contracts listed in Annex II, credit derivatives, securities financing transactions and positions referred to in Articles 429d and 429g, calculated in accordance with Article 429f;

(e) 

regular-way purchases or sales awaiting settlement, calculated in accordance with Article 429g.

Institutions shall treat long settlement transactions in accordance with points (a) to (d) of the first subparagraph, as applicable.

Institutions may reduce the exposure values referred to in points (a) and (d) of the first subparagraph by the corresponding amount of general credit risk adjustments to on- and off-balance-sheet items, respectively, subject to a floor of 0 where the credit risk adjustments have reduced the Tier 1 capital.

5.  

By way of derogation from point (d) of paragraph 4, the following provisions shall apply:

(a) 

an off-balance-sheet item in accordance with point (d) of paragraph 4 that is treated as a derivative in accordance with the applicable accounting framework shall be subject to the treatment set out in point (b) of that paragraph;

(b) 

where a client of an institution acting as a clearing member enters directly into a derivative transaction with a CCP and the institution guarantees the performance of its client's trade exposures to the CCP arising from that transaction, the institution shall calculate its exposure resulting from the guarantee in accordance with point (b) of paragraph 4, as if that institution had entered directly into the transaction with the client, including with regard to the receipt or provision of cash variation margin.

The treatment set out in point (b) of the first subparagraph shall also apply to an institution acting as a higher-level client that guarantees the performance of its client's trade exposures.

For the purposes of point (b) of the first subparagraph and of the second subparagraph of this paragraph, institutions may consider an affiliated entity as a client only where that entity is outside the regulatory scope of consolidation at the level at which the requirement set out in point (d) of Article 92(3) is applied.

6.  
For the purposes of point (e) of paragraph 4 of this Article and Article 429g, ‘regular-way purchase or sale’ means a purchase or a sale of a security under contracts for which the terms require delivery of the security within the period established generally by law or convention in the marketplace concerned.
7.  

Unless otherwise expressly provided for in this Part, institutions shall calculate the total exposure measure in accordance with the following principles:

(a) 

physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce the total exposure measure;

(b) 

assets shall not be netted with liabilities.

8.  

By way of derogation from point (b) of paragraph 7, institutions may reduce the exposure value of a pre-financing loan or an intermediate loan by the positive balance on the savings account of the debtor to which the loan was granted and only include the resulting amount in the total exposure measure, provided that all the following conditions are met:

(a) 

the granting of the loan is conditional upon the opening of the savings account at the institution granting the loan and both the loan and the savings account are regulated by the same sectoral law;

(b) 

the balance on the savings account cannot be withdrawn, in part or in full, by the debtor for the entire duration of the loan;

(c) 

the institution can unconditionally and irrevocably use the balance on the savings account to settle any claim originating under the loan agreement in cases regulated by the sectoral law referred to in point (a), including the case of non-payment by or the insolvency of the debtor.

Pre-financing loan’ or ‘intermediate loan’ means a loan that is granted to the borrower for a limited period of time in order to bridge the borrower's financing gaps until the final loan is granted in accordance with the criteria laid down in the sectoral law regulating such transactions.

In force

Version from: 08/07/2022

Amendment History