Basel III is the global standard for bank regulation, but each country implements it in slightly different ways. Previous posts showed how the SLR and LCR create constraints that impact short-term rates, but different methods of implementing those regulations also affect markets. European banks calculate their leverage ratio in a way that has made their balance sheets significantly more elastic between quarter-end dates. This difference was a key driver of quarter-end dynamics in recent years. …
Published on March 29, 2021 by Joseph Wang Free