4.36. Application

The rules in this section apply only to Authorised Firms licensed by the AFSA to conduct the Regulated Activities of “Accepting Deposits” or “Providing Credit”.

4.37. Calculation of Leverage Ratio

(1) A Bank must calculate its Leverage Ratio in accordance with the following formula:

Where:

1. (a) “Capital Measure” represents T1 Capital of the Bank calculated in accordance with Rule 4.13; and
2. (b) “Exposure Measure” represents the value of exposures of the Bank calculated in accordance with (2) of this rule.

(2) For the purpose of determining the Exposure Measure, the value of exposures of a Bank must be calculated in accordance with the International Financial Reporting Standards (IFRS) subject to the following adjustments:

1. (a) on-balance sheet, non-derivative exposures must be net of specific allowances and valuation adjustments (e.g. credit valuation adjustments);
2. (b) physical or financial collateral, guarantees or Credit Risk mitigation purchased must not be used to reduce on-balance sheet exposures; and
3. (c) loans must not be netted with deposits. Note Detailed guidance specifying the methodologies, parameters and formulae for calculating the Leverage Ratio are set out in Section D of Chapter 4 of the Banking Prudential Guideline (BPG) issued by the AFSA.