Risk-weighted capital requirement or simple leverage ratio

Introduction

According to press reports, BaFin and the Deutsche Bundesbank propose in a joint non-paper, i.e. an unofficial discussion paper, to abolish the risk-weighted core capital ratio for institutions with total assets of up to ten billion euros and replace it with a risk-unweighted capital requirement in the form of an (increased) leverage ratio (LR) in conjunction with additional buffer solutions. For background information, see also the series of articles¹ by msg for banking.