19.A leverage adjustment is applied to the average risk weight of the fund under either the LTA or the MBA. A similar leverage adjustment is not necessary for the FBA, because the risk weight of 1250% applied under the FBA to equity investments in funds is fixed at that maximum value.

20.When determining the leverage adjustment under the MBA, banks are required to make conservative assumptions using information from the fund’s mandate. Specifically, the Standards requires that banks assume the fund will use financial leverage up to the maximum amount permitted under the fund’s mandate, or up to the maximum permitted under the regulations governing that fund. This maximum may be significantly greater than the actual leverage for the fund at any point in time.