Leverage Ratio Disclosure Requirements

On January 12, 2014, the Basel Committee on Banking Supervision (BCBS) issued the full text of the Basel III leverage ratio framework and disclosure requirementsBCBS January 12, 2014&#58;<em> Basel III leverage ratio framework and disclosure requirements</em>  <a href="https://www.bis.org/publ/bcbs270.pdf" rel="external">http://www.bis.org/publ/bcbs270.pdf</a> (the BCBS LR Framework).  The BCBS LR Framework introduces a simple, transparent, non-risk based leverage ratio to act as a credible supplementary measure to the risk-based capital requirements and includes public disclosure requirements starting January 1, 2015.

This guidelineFormerly the guideline entitled Public Capital Disclosure Requirements related to Basel III Leverage Ratio, last revised in December 2017. provides clarification on the implementation of the BCBS LR Framework disclosure requirements for all institutionsBanks and bank holding companies, to which the Bank Act applies; federally regulated trust or loan companies, to which the Trust and Loan Companies Act applies; and cooperative retail associations, to which the Cooperative Credit Associations Act applies; are collectively referred to as "institutions". (LR disclosures) and builds on OSFI's April 2017 Pillar 3 Disclosure Requirements guideline.

1. Scope of Application

All institutions should apply Part 2 and Part 3 of this guideline. Domestic Systemically Important Banks (D-SIBs) are required to make disclosures as described in Part 4 of this guideline. All other institutions ("non-D-SIBs") are required to make disclosures as described in Part 5 of this guideline.

Exemption from disclosures applies to institutions that continue to meet the exemption criteria outlined in OSFI's Pillar 3 Disclosure Requirements guideline.

2. Implementation date and frequency of reporting

OSFI requires institutions to fully implement the revised disclosures as described in this guideline in the first quarter of 2019. Institutions can disclose additional information at their discretion.

Disclosures are to be made at the same frequency as, and concurrently with, the publication of the financial statements.  For those institutions that do not publish financial statements, the LR disclosures should be provided at the same frequency as the publication of their Pillar 3 disclosures.

3. Availability of disclosures

Institutions must either disclose required information as described in Part 4 or Part 5 of this guideline within their published financial statements or, at a minimum, provide a direct link to the completed disclosures on their website.  Institutions that do not publish financial statements must disclose required information with their other Pillar 3 disclosures as described in OSFI's  Pillar 3 Disclosure Requirements guideline.

Institutions must make available on their website an ongoing archive of all reconciliation templates, disclosure templates and explanatory tables relating to prior reporting periods.  Institutions are required to ensure public access to previously issued Pillar 3 disclosures for a minimum of 12 months; where institutions make investor information available for longer periods, the same archive period should also be used for Pillar 3 disclosures.

4. Disclosure requirements for D-SIBs

D-SIBs are required to publicly disclose:

1. Summary comparison table – D-SIBs are required to report the reconciliation of their balance sheet assets from their financial statements with the leverage ratio exposure measure, using the attached Reporting Table 1 in Annex I.

2. Common disclosure template – D-SIBs are required to provide a breakdown of the main leverage ratio regulatory elements, using the attached Reporting Table 2 in Annex I. 

3. Reconciliation with public financial statements – D-SIBs are required to disclose the source of material differences between their total balance sheet assets (net of on-balance sheet derivative and securities financing transaction (SFT) assets) as reported in their financial statements and their on-balance sheet exposures in line 1 of the common disclosure template.

4. Other – D-SIBs are required to explain the key drivers of material changes in their Basel III leverage ratio observed from the end of the previous reporting period to the end of the current reporting period (whether the changes stem from changes in the numerator and/or from changes in the denominator).

5. Disclosure requirements for non-D-SIBs

Non-D-SIBs are required to provide a breakdown of the main leverage ratio regulatory elements using the attached Reporting Table 2 in Annex I.

ANNEX I – Reporting Tables

All tables shown below have been extracted from and should be read in conjunction with the BCBS LR Framework and OSFI's Leverage Requirements (LR) guideline.OSFI's Leverage Requirements guideline: <a href="/node/626">http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/LR19.aspx</a>

Table 1Paragraph 52, BCBS January 12, 2014:<em> Basel III leverage ratio framework and disclosure requirements</em>  <a href="https://www.bis.org/publ/bcbs270.pdf" rel="external">http://www.bis.org/publ/bcbs270.pdf</a> : LR1 - Summary comparison of accounting assets vs. leverage ratio exposure measure for D-SIBs

The following provides the Basel LR Framework description (with references to OSFI's LR guideline) for each line item in Table 1:

• line 1 should show the D-SIB's total consolidated assets as per their financial statements;
• line 2 should show adjustments related to investments in banking, financial, insurance or commercial entities that are consolidated for accounting purposes, but outside the scope of regulatory consolidation as set out in paragraphs 4 and 15 of the LR guideline;
• line 3 should show the reduction of the leverage ratio exposure measure due to the exclusion of securitized exposures that meet the operational requirement for the recognition of risk transference according to paragraph 17 of OSFI's LR guideline.  As these adjustments reduce the total leverage ratio exposure measure, they should be reported as a negative amount.   
• line 4 should show adjustments related to any fiduciary assets recognised on the balance sheet pursuant to the institution's operative accounting framework but excluded from the leverage ratio exposure measure, as described in footnote 4 of the BCBS LR Framework. There is no adjustment for institutions as they are subject to IFRS;
• lines 5 and 6 should show adjustments related to derivative financial instruments and securities financing transactions (i.e. repo assets and other similar secured lending), respectively;
• line 7 should show the credit equivalent amount of off balance sheet items, as determined under paragraphs 39 to 47 of the LR guideline;
• line 8 should show any other adjustments; and
• line 9 should show the leverage ratio exposure measure, which should be the sum of the previous items. This should also be consistent with line 21 of Table 2 below.

D-SIBs should disclose the row numbers as indicated below to ensure that market participants can easily compare D-SIBs both nationally and internationally. Where there is no value in a box, the row can be reported as N/A or Nil but the row number must not change.

Table 2: LR2 - Leverage ratio common disclosure template for D-SIBs and non-D-SIBsPage 12, Lines 1 to 22&#58; BCBS January 12, 2014:<em> Basel III leverage ratio framework and disclosure requirements:</em>  <a href="https://www.bis.org/publ/bcbs270.pdf" rel="external">http://www.bis.org/publ/bcbs270.pdf</a>.
(Explanations of each row are provided on the following page)

The following provides the Basel LR Framework description (with references to OSFI's Leverage Requirements Guideline) for each line item in Table 2.

Institutions should disclose the row numbers as indicated below to ensure that market participants can easily compare institutions. Where there is no value in a box, the row can be N/A or Nil but the row number must not change.