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FRM Part II · FRM Exam Part II · Basel III: Finalising Post-crisis Reforms

Under the finalised Basel III leverage ratio framework, which of the following is the buffer applied to global systemically important banks (G-SIBs)?

G-SIBs face a leverage ratio buffer equal to 50% of their risk-weighted higher-loss-absorbency requirement, added to the 3% minimum leverage ratio and met with Tier 1 capital. It is not a flat add-on or a full match.

  1. AA leverage ratio buffer equal to 50% of the G-SIB's higher-loss-absorbency risk-weighted requirementCorrect
  2. BA leverage ratio buffer equal to 100% of the G-SIB's risk-weighted buffer
  3. CA fixed 1% Tier 1 add-on for all G-SIBs
  4. DNo buffer; G-SIBs only face the 3% minimum

Explanation

The revised framework adds a leverage ratio buffer for G-SIBs set at 50% of the bank's risk-weighted higher-loss-absorbency requirement, on top of the 3% minimum. The buffer must be met with Tier 1 capital. A flat 1% or 100% scaling is incorrect.

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