Tough Leverage Rule Would Curb Banks' Derivatives Use

Law360, New York (June 26, 2013, 3:04 PM EDT) -- A panel of global regulators on Wednesday proposed a standard that will require banks to pull back on their exposure to derivatives in order to comply with a tight leverage ratio included in new, heightened capital standards.

The Basel Committee on Banking Supervision proposed using international accounting standards for totaling up banks' derivative exposures in its guidelines for determining banks' leverage ratios, a measure that determines how much capital banks have relative to their assets including loans and derivatives. Because of that, banks will have to...
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