World Council calls for leverage ratio disclosure flexibility
The World Council of Credit Unions urged the Basel Committee in Banking Supervision to provide flexibility when it comes to leverage ratio disclosures. The Basel Committee is the primary global standard setter for the prudential regulation of banks.
The committee is seeking input on its consultative document “Revisions to Leverage Ratio Disclosure Requirements” and it seeking to address the issue of “window dressing. This occurs with internationally active, publicly traded banks reduce their balance sheets for end-quarter and end-year disclosure purposes that have macroeconomic effects and can provide misleading information to investors.
“Our members are cooperative depository institutions that are not publicly traded, rarely operate on a cross-border basis and do not typically engage in the ‘window dressing’ behavior that this proposal seeks to address,” the letter reads. “We are concerned that mandating the use of daily averages in disclosures issued by community-based depository institutions following standardized risk-based capital approaches may result in disproportionate reporting burdens on noncomplex institutions.
“We do, however, support community-based depository institutions having the option to use daily averages for reporting purposes,” it adds.
The World Council also expresses concerns that the computer system upgrades necessary to track daily averages could result in disproportionate compliance costs, especially in the case of smaller credit unions.