64.Bank calculations under this Standard and associated bank processes must be subject to appropriate levels of independent review and challenge. Reviews must cover material aspects of the calculations under this Standards, including but not limited to the computation of Tier 1 capital, the measurement of on-balance-sheet, derivative, SFT, and off-balance-sheet exposures, any netting, deductions, or offsets applied in the process, and the accuracy for all components of the leverage calculation reported to the Central Bank as part of regulatory reporting.

65.Banks must meet the minimum leverage ratio requirement at all times. For the purpose of disclosure requirements, banks must calculate the leverage ratio on a quarter-end basis to prevent potential regulatory arbitrage by banks and temporary reductions of transaction volumes in key financial markets around reference dates with the aim of reporting and publicly disclosing elevated leverage ratios. Such leverage ratios are misleading, suggesting that a bank’s reliance on debt to fund its activities is deceptively less than the actual amounts between the reference dates. This misleads stakeholders about its true resilience, and risks disrupting the operations of financial markets.

Accordingly, in evaluating its leverage ratio exposure, a bank should assess the volatility of transaction volumes throughout reporting periods, and the effect on its leverage ratio requirements. Banks should also desist from undertaking transactions with the sole purpose of reporting and disclosing higher leverage ratios at reporting days only.