Accessibility Statement Skip Navigation
  • Why PRWeb
  • How It Works
  • Who Uses It
  • Pricing
  • Login
  • GDPR
  • Create a Free Account
Return to PRWeb homepage
  • News
  • Resources
  • Contact
When typing in this field, a list of search results will appear and be automatically updated as you type.

Searching for your content...

No results found. Please change your search terms and try again.
  • News in Focus
      • Browse News Releases

      • All News Releases
      • Multimedia Gallery

      • All Multimedia
      • All Photos
      • All Videos
  • Business & Money
      • Auto & Transportation

      • Aerospace, Defense
      • Air Freight
      • Airlines & Aviation
      • Automotive
      • Maritime & Shipbuilding
      • Railroads and Intermodal Transportation
      • Supply Chain/Logistics
      • Transportation, Trucking & Railroad
      • Travel
      • Trucking and Road Transportation
      • View All Auto & Transportation

      • Business Technology

      • Blockchain
      • Broadcast Tech
      • Computer & Electronics
      • Computer Hardware
      • Computer Software
      • Data Analytics
      • Electronic Commerce
      • Electronic Components
      • Electronic Design Automation
      • Financial Technology
      • High Tech Security
      • Internet Technology
      • Nanotechnology
      • Networks
      • Peripherals
      • Semiconductors
      • View All Business Technology

      • Entertain­ment & Media

      • Advertising
      • Art
      • Books
      • Entertainment
      • Film and Motion Picture
      • Magazines
      • Music
      • Publishing & Information Services
      • Radio & Podcast
      • Television
      • View All Entertain­ment & Media

      • Financial Services & Investing

      • Accounting News & Issues
      • Acquisitions, Mergers and Takeovers
      • Banking & Financial Services
      • Bankruptcy
      • Bond & Stock Ratings
      • Conference Call Announcements
      • Contracts
      • Cryptocurrency
      • Dividends
      • Earnings
      • Earnings Forecasts & Projections
      • Financing Agreements
      • Insurance
      • Investments Opinions
      • Joint Ventures
      • Mutual Funds
      • Private Placement
      • Real Estate
      • Restructuring & Recapitalization
      • Sales Reports
      • Shareholder Activism
      • Shareholder Meetings
      • Stock Offering
      • Stock Split
      • Venture Capital
      • View All Financial Services & Investing

      • General Business

      • Awards
      • Commercial Real Estate
      • Corporate Expansion
      • Earnings
      • Environmental, Social and Governance (ESG)
      • Human Resource & Workforce Management
      • Licensing
      • New Products & Services
      • Obituaries
      • Outsourcing Businesses
      • Overseas Real Estate (non-US)
      • Personnel Announcements
      • Real Estate Transactions
      • Residential Real Estate
      • Small Business Services
      • Socially Responsible Investing
      • Surveys, Polls and Research
      • Trade Show News
      • View All General Business

  • Science & Tech
      • Consumer Technology

      • Artificial Intelligence
      • Blockchain
      • Cloud Computing/Internet of Things
      • Computer Electronics
      • Computer Hardware
      • Computer Software
      • Consumer Electronics
      • Cryptocurrency
      • Data Analytics
      • Electronic Commerce
      • Electronic Gaming
      • Financial Technology
      • Mobile Entertainment
      • Multimedia & Internet
      • Peripherals
      • Social Media
      • STEM (Science, Tech, Engineering, Math)
      • Supply Chain/Logistics
      • Wireless Communications
      • View All Consumer Technology

      • Energy & Natural Resources

      • Alternative Energies
      • Chemical
      • Electrical Utilities
      • Gas
      • General Manufacturing
      • Mining
      • Mining & Metals
      • Oil & Energy
      • Oil and Gas Discoveries
      • Utilities
      • Water Utilities
      • View All Energy & Natural Resources

      • Environ­ment

      • Conservation & Recycling
      • Environmental Issues
      • Environmental Policy
      • Environmental Products & Services
      • Green Technology
      • Natural Disasters
      • View All Environ­ment

      • Heavy Industry & Manufacturing

      • Aerospace & Defense
      • Agriculture
      • Chemical
      • Construction & Building
      • General Manufacturing
      • HVAC (Heating, Ventilation and Air-Conditioning)
      • Machinery
      • Machine Tools, Metalworking and Metallurgy
      • Mining
      • Mining & Metals
      • Paper, Forest Products & Containers
      • Precious Metals
      • Textiles
      • Tobacco
      • View All Heavy Industry & Manufacturing

      • Telecomm­unications

      • Carriers and Services
      • Mobile Entertainment
      • Networks
      • Peripherals
      • Telecommunications Equipment
      • Telecommunications Industry
      • VoIP (Voice over Internet Protocol)
      • Wireless Communications
      • View All Telecomm­unications

  • Lifestyle & Health
      • Consumer Products & Retail

      • Animals & Pets
      • Beers, Wines and Spirits
      • Beverages
      • Bridal Services
      • Cannabis
      • Cosmetics and Personal Care
      • Fashion
      • Food & Beverages
      • Furniture and Furnishings
      • Home Improvement
      • Household, Consumer & Cosmetics
      • Household Products
      • Jewelry
      • Non-Alcoholic Beverages
      • Office Products
      • Organic Food
      • Product Recalls
      • Restaurants
      • Retail
      • Supermarkets
      • Toys
      • View All Consumer Products & Retail

      • Entertain­ment & Media

      • Advertising
      • Art
      • Books
      • Entertainment
      • Film and Motion Picture
      • Magazines
      • Music
      • Publishing & Information Services
      • Radio & Podcast
      • Television
      • View All Entertain­ment & Media

      • Health

      • Biometrics
      • Biotechnology
      • Clinical Trials & Medical Discoveries
      • Dentistry
      • FDA Approval
      • Fitness/Wellness
      • Health Care & Hospitals
      • Health Insurance
      • Infection Control
      • International Medical Approval
      • Medical Equipment
      • Medical Pharmaceuticals
      • Mental Health
      • Pharmaceuticals
      • Supplementary Medicine
      • View All Health

      • Sports

      • General Sports
      • Outdoors, Camping & Hiking
      • Sporting Events
      • Sports Equipment & Accessories
      • View All Sports

      • Travel

      • Amusement Parks and Tourist Attractions
      • Gambling & Casinos
      • Hotels and Resorts
      • Leisure & Tourism
      • Outdoors, Camping & Hiking
      • Passenger Aviation
      • Travel Industry
      • View All Travel

  • Policy & Public Interest
      • Policy & Public Interest

      • Advocacy Group Opinion
      • Animal Welfare
      • Congressional & Presidential Campaigns
      • Corporate Social Responsibility
      • Domestic Policy
      • Economic News, Trends, Analysis
      • Education
      • Environmental
      • European Government
      • FDA Approval
      • Federal and State Legislation
      • Federal Executive Branch & Agency
      • Foreign Policy & International Affairs
      • Homeland Security
      • Labor & Union
      • Legal Issues
      • Natural Disasters
      • Not For Profit
      • Patent Law
      • Public Safety
      • Trade Policy
      • U.S. State Policy
      • View All Policy & Public Interest

  • People & Culture
      • People & Culture

      • Aboriginal, First Nations & Native American
      • African American
      • Asian American
      • Children
      • Diversity, Equity & Inclusion
      • Hispanic
      • Lesbian, Gay & Bisexual
      • Men's Interest
      • People with Disabilities
      • Religion
      • Senior Citizens
      • Veterans
      • Women
      • View All People & Culture

  • Hamburger menu
  • Cision PRWeb provides efficient communication tools to continuously engage with target audiences across multiple online channels
  • Create a Free Account
    • ALL CONTACT INFO
    • Contact Us


      11AM ET Sunday – 8PM ET Friday

  • Send a Release
  • Sign up
  • Log in
  • Resources
  • RSS
  • GDPR
  • News in Focus
    • Browse All News
    • Multimedia Gallery
  • Business & Money
    • Auto & Transportation
    • Business Technology
    • Entertain­ment & Media
    • Financial Services & Investing
    • General Business
  • Science & Tech
    • Consumer Technology
    • Energy & Natural Resources
    • Environ­ment
    • Heavy Industry & Manufacturing
    • Telecomm­unications
  • Lifestyle & Health
    • Consumer Products & Retail
    • Entertain­ment & Media
    • Health
    • Sports
    • Travel
  • Policy & Public Interest
  • People & Culture
    • People & Culture
  • Send a Release
  • Sign up
  • Log in
  • Resources
  • RSS
  • GDPR
  • Send a Release
  • Sign up
  • Log in
  • Resources
  • RSS
  • GDPR
  • Send a Release
  • Sign up
  • Log in
  • Resources
  • RSS
  • GDPR

SNL Financial highlights European and US bank leverage ratio challenge in recent report
  • USA - English


News provided by

SNL Financial

Dec 05, 2013, 03:00 ET

Share this article

Share toX

Share this article

Share toX

SNL calculated leverage ratios
SNL calculated leverage ratios

London, United Kingdom (PRWEB) December 05, 2013 -- During the past year, the leverage ratio has rapidly become a key measure for regulators and legislators around the globe who are looking long and hard at strengthening bank capital. This reflects the mistrust of risk-weighting assets — the authorities are seeking to ensure that all globally significant banks have a minimum of capital on their balance sheets irrespective of their assessed risks.

Under SNL figures, taking an IFRS view, the U.S. investment banks might struggle to meet the 5% to 6% being demanded within four years

Post this

The Basel Committee is testing a 3% ratio until 2016-end, but already moves are afoot around the globe to lift the figure higher and sooner. Much now depends upon the committee's final definition of the ratio, which is due in early 2014, while the EU is poised to determine the rules for leverage disclosure by banks from Jan. 1, 2015.

In line with the need for transparency, important for investors as well as regulators, SNL has tried to create a standardized picture of leading U.S. and European banks and their leverage ratio.

In fact, this is extraordinarily difficult. Our figures do underline one of the key issues faced by the Basel Committee — the widely varying effects of accounting standards, notably the difference between U.S. GAAP and IFRS. The charts produced by SNL also reveal that both the numerator and the denominator of this ratio are far from clear, as JPMorgan and Morgan Stanley have indicated.

We have taken two variants of the ratio under both U.S. GAAP and IFRS. The first, tangible equity as a percentage of tangible assets, might be seen as a standard balance sheet view; the second, using Tier 1 capital as cited by the banks, tries to replicate the regulators' view. We use tangible equity to exclude intangibles such as goodwill and intellectual property.

Overall, there is an average variation of some 10 to 30 basis points attributable to the differing numerator definitions. This is large enough to be significant but not to be worrying overall.

For individual institutions, however, it makes a weak ratio look even worse; this applies especially to Deutsche Bank AG. It is not surprising that its hierarchy has repeatedly publicly criticized the leverage ratio.

More dramatic overall is the effect on the leverage ratio of imposing U.S. GAAP standards on European banks and, in particular, IFRS standards on U.S. banks. This significantly reduces but does not eliminate the apparent capital gap between the two systems. This exists, as European bankers like to point out, not least because U.S. banks do not have very large mortgage books, unlike their European peers. Mortgage lending in Europe is also, generally, less risky.

One key issue is the way that derivative assets are treated; eliminating the netting of derivatives used under U.S. GAAP means that U.S. banks appear distinctly less strong, on average only 60 basis points better than our European cohort on the basis of our "regulatory" leverage ratio.

It is, indeed, noticeable that the capital position of Morgan Stanley on this view is worse than that of Barclays, UBS, Société Générale SA and BNP Paribas SA. JPMorgan is better capitalized but is still weaker than our European cohort on average while standing better than most of the leading European investment banks.

It is, indeed, clear that the investment banks' capital looks significantly weaker than the retail banks' under any measure. Yet it is also clear that accounting standards have a massive effect generally on the leverage ratio; using U.S. GAAP instead of IFRS to calculate the leverage ratio benefits Morgan Stanley and Goldman Sachs Group Inc. by more than 300 basis points, a truly massive figure.

Under SNL figures, taking an IFRS view, the U.S. investment banks might struggle to meet the 5% to 6% being demanded within four years, yet such figures would clearly also be a stretch for many leading European banks. The issuance of new Tier 1 instruments such as contingent convertibles looks sure to be part of the answer.

Although much detail needs to be concluded, the overall picture for investors and bank management is troubling. The pressure on banks to strengthen capital and reduce assets will continue to be fierce. This means that the capital repatriation story, which has driven bank shares on both sides of the Atlantic, looks increasingly weak.

Read the full report: http://www.snl.com/InteractiveX/Article.aspx?cdid=A-26103995-12332.

About SNL Financial
SNL Financial is a leading provider of financial information on more than 3,300 public companies and 50,000 private companies in the business sectors critical to the global economy: Banking, Financial Services, Insurance, Real Estate, Energy, Media & Communications and Metals & Mining. The SNL information service integrates breaking news, comprehensive data and expert analysis into an electronic database available online and updated around the clock.

Christina Twomey, SNL Financial, http://www.SNL.com/, +1 (212) 542-8033, [email protected]

Modal title

SNL calculated leverage ratios
SNL calculated leverage ratios
SNL calculated leverage ratios

Contact PRWeb

  • 11AM ET Sunday – 8PM ET Friday
  • Contact Us

About PRWeb

  • About PRWeb
  • Partners
  • Partnership Programs
  • Editorial Guidelines
  • Resources

Why PRWeb

  • Why PRWeb
  • How It Works
  • Who Uses It
  • Pricing

Accounts

  • Create a Free Account
  • Log in
  • Contact Us

Do not sell or share my personal information:

  • Submit via [email protected] 
  • Call Privacy toll-free: 877-297-8921

Contact Cision

Products

About

My Services
  • All News Releases
  • Online Member Center
  • ProfNet
Cision Distribution Helpline
888-776-0942
  • Legal
  • Site Map
  • RSS
  • Cookie Settings
Copyright © 2025 Cision US Inc.