Determination of additional own funds requirement to address the risk of excessive leverage
On the basis of the assessment performed under Section 7.3.1 of these Guidelines, competent authorities should determine the additional own funds requirements to address the risk of excessive leverage as the difference between the capital considered adequate to cover the risk of excessive leverage and the leverage ratio own funds requirements as set out in Article 92(1) point (d) of Regulation (EU) No 575/2013. This amount cannot be negative.
When setting additional own funds requirements to address the risk of excessive leverage competent authorities should consider in particular:
elements of risk of excessive leverage that are considered not covered or not sufficiently covered by the leverage ratio own funds requirement set out in Article 92(1), point (d) of Regulation (EU) No 575/2013, particularly where the assessment of the aspects described in paragraphs 393 or 394 indicate a high vulnerability when compared to the leverage ratio exposure.
elements of risk of excessive leverage that are explicitly excluded from or not explicitly addressed by the leverage ratio own funds requirement, including due to the exclusions listed in Article 429a(1) of Regulation (EU) No 575/2013 assessed in accordance with paragraph 394b. Competent authorities should set additional own funds requirements only in those cases, where particularly extensive use of a certain exclusion results in a level of leverage ratio that does not appropriately reflect the risk faced by the institution.
Competent authorities should ensure that the capital considered adequate to cover the risk of excessive leverage is not lower than the leverage ratio own funds requirements (i.e. the additional own funds requirements to address the risk of excessive leverage cannot be negative).
Competent authorities should identify, assess and quantify the risk of excessive leverage following the sources of information and methods set out in paragraphs 370 and 371, using the available sources of information to the extent that they are relevant for the risk of excessive leverage.