Deutsche Bank Supports Comparable Bank Leverage RulesNicholas Dunbar and Nicholas Comfort
Deutsche Bank AG, continental Europe’s biggest bank, said it supports a plan by global regulators to create equal standards for lenders on capital holdings versus the value of their assets.
“We think a globally standardized definition of the leverage ratio is reasonable,” Stefan Krause, chief financial officer of Frankfurt-based Deutsche Bank, said yesterday in a phone interview. “It allows to compare apples with apples.”
The Basel Committee on Banking Supervision this week proposed revamping standards for the leverage ratio to ensure that the rule would be applied consistently worldwide. Unlike European lenders such as Deutsche Bank, U.S. banks are able to reduce their total assets by excluding the value of some derivatives.
Deutsche Bank’s assets were 36 times the value of its equity at the end of March under the International Financial Reporting Standards, which apply to European banks, and 21 times under a method similar to the Generally Accepted Accounting Principles followed by U.S. banks, company filings show.
Under the Basel plan, banks would have to hold Tier 1 capital equivalent to 3 percent of their assets. While the leverage ratio won’t be binding until 2018, lenders would be obliged to start publishing how well they measure up to it by the start of 2015, according to the committee.
U.K., U.S. and Swiss regulators are increasingly looking at leverage, in addition to measures based on risk weightings assigned to different assets, to gauge banks’ financial strength. Their focus intensified as some banks improved capital ratios following the financial crisis by altering internal models or cutting risk-weighted assets without correspondingly shrinking their balance sheets.
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