This section sets out the potential impact of each of the elements of the proposed leverage ratio framework - the minimum leverage ratio requirement (Section 3.1), the supplementary leverage ratio buffer (Section 3.2), and the countercyclical leverage ratio buffer (Section 3.3) - on financial stability and growth. Section 3.4 presents the FPC’s quantitative analysis of the impact of introducing the proposed leverage ratio framework.
The analysis considers the incremental impact of the proposed leverage ratio framework over and above existing plans under CRD IV/CRR to move to higher risk-weighted capital requirements by 2019. This incremental impact is shown to be modest.
Figure 1 is a stylised illustration of the key channels arising from the application of the risk-weighted and leverage ratio frameworks.