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A global regulator has backed calls for limits on how much banks can leverage their loan books.
The Basel Committee has echoed the Murray Inquiry’s recommendation of a “capital floor” for risk-weighted capital, Fairfax has reported. The international banking regulator has called for a leverage ratio in conjunction with the floor for risk-weighted capital.
The move echoes suggestuons from the Murray Inquiry, Fairfax said, which called for a risk-weighted capital floor of 25-30% on mortgages written by Australian banks.
The Basel Committee’s recommendation would apply a leverage ratio across all a bank’s assets, rather than specific loan types such as mortgages or bysiness loans, Fairfax said.
