As of 17 September 2020, banks have been permitted to temporarily exclude certain central bank exposures from the calculation, reporting and disclosure of what is known as the leverage ratio. As the leverage ratio requirement is set to become binding on 28 June 2021 with the entry into force of the new Capital Requirements Regulation (CRR), DNB has now extended the temporary leverage ratio relief.
Acting in line with the European Central Bank (ECB), De Nederlandsche Bank (DNB) has confirmed that exceptional circumstances apply due to the coronavirus pandemic. DNB therefore applies the same relief measure to the smaller banks under its direct supervision, as that which the ECB announced for larger European banks on 18 June 2021.
The measure applies until 31 March 2022 and permits banks to temporarily exclude specific central bank exposures (coins and banknotes as well certain deposits held at the central bank) from the calculation of the leverage ratio. These institutions will however then be subject to a partially higher leverage ratio requirement, in order to offset the exclusion of the central bank reserves they hold under "normal" circumstances, as set out in the CRR.
The leverage ratio expresses the total exposure of a bank as a percentage of its own funds. The ratio is one of the indicators used to assess a bank's resilience to shocks.
The decision frees up capital, which increases banks' capacity for lending.
For more information, please call Tobias Oudejans on +31 20 524 3100 or +31 6 524 96 961.
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