11.The leverage ratio exposure measure generally follows gross accounting values.

12.Unless specified differently below, banks must not take account of physical or financial collateral, guarantees or other credit risk mitigation techniques to reduce the leverage ratio exposure measure, nor may banks net assets and liabilities.

13.To ensure consistency, any item deducted from Tier 1 capital according to the Central Bank’s risk-based capital framework and regulatory adjustments other than those related to liabilities may be deducted from the leverage ratio exposure measure.

14.Liability items must not be deducted from the leverage ratio exposure measure.

15.With regard to traditional securitizations, an originating bank may exclude securitized exposures from its leverage ratio exposure measure if the securitization meets the operational requirements for the recognition of risk transference according to the Central Bank’s securitization framework. Banks meeting these conditions must include any retained securitization exposures in their leverage ratio exposure measure. In all other cases, the securitized exposures must be included in the leverage ratio exposure measure.

16.Where the Central Bank is concerned that transactions are not adequately captured in the leverage ratio exposure measure or may lead to a potentially destabilizing deleveraging process, it will carefully scrutinize these transactions and consider a range of actions to address such concerns. Central Bank actions may include requiring enhancements in banks’ management of leverage, imposing operational requirements (e.g. additional reporting to supervisors), requiring that the relevant exposure is adequately capitalized through a Pillar 2 capital charge, or any other measures deemed appropriate.

17.To facilitate the implementation of monetary policies, the Central Bank may consider temporarily exempting certain central bank reserves (that is, bank balances or placements at the central bank) from the leverage ratio exposure measure in exceptional macroeconomic circumstances. In such an event, the Central Bank would also increase the calibration of the minimum leverage ratio requirement commensurately to offset the impact of exempting central bank reserves. In addition, banks would be required to disclose the impact of any temporary exemption alongside ongoing public disclosure of the leverage ratio without application of such exemption.

18.A bank’s total leverage ratio exposure measure is the sum of the following exposures:

• •On balance sheet exposures (excluding on-balance-sheet derivative and SFT exposures);
• •derivative exposures;
• •SFT exposures; and
• •Off-balance sheet items.

The specific treatments for these four main exposure types are defined below.