Leverage ratio – revised exposure definition
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Individual Reform: Leverage ratio – revised exposure definition 2026 - 2027

Implementation of the Basel III revised leverage ratio, including an updated exposure definition to better capture both on- and off-balance sheet risks.

No data available for the deliverable: Implementation of the Basel III revised leverage ratio, including an updated exposure definition to better capture both on- and off-balance sheet risks.

No data available for the deliverable: Implementation of the Basel III revised leverage ratio, including an updated exposure definition to better capture both on- and off-balance sheet risks.

No data available for the deliverable: Implementation of the Basel III revised leverage ratio, including an updated exposure definition to better capture both on- and off-balance sheet risks.

No data available for the deliverable: Implementation of the Basel III revised leverage ratio, including an updated exposure definition to better capture both on- and off-balance sheet risks.

No data available for the deliverable: Implementation of the Basel III revised leverage ratio, including an updated exposure definition to better capture both on- and off-balance sheet risks.

Summary

The reform updates the exposure definition and introduces a leverage ratio buffer for D-SIBs (domestic systemically important banks), aligns with BCBS refinements (eg, derivatives, SFTs) and enhances disclosure requirements. In addition, it adjusts the calculation of leverage ratio for banks. This is progressing with implementation under way (deadline mid-2025).

Canvas not supported.

Is it working?

The reform is almost complete, with final compliance steps implemented in July 2025. Subsequently, the prudential authority (PA) confirmed in its regulatory publications and directives that the revised leverage ratio exposure definition, part of the Basel III post-crisis reform became operational on 1 July 2025.

Actions

Banks are well above the minimum leverage ratio and the revised definition has improved comparability and transparency.

Are there plans?

Regulatory amendments and new disclosure templates have been rolled out, with public reporting now standard.

Is it on the agenda?

The SARB/Prudential Authority have made this a key Basel III deliverable, with phased implementation and industry reporting.

Goals

To strengthen the leverage ratio as a backstop to risk-based capital requirements and enhance transparency.

References

Departments / Govt Institutions

National Treasury South African Reserve Bank (SARB)

Summary

The reform updates the exposure definition and introduces a leverage ratio buffer for D-SIBs (domestic systemically important banks), aligns with the Basel Committee on Bank Supervision refinements (eg, derivatives rules and securities and financing transactions) and enhances disclosure requirements. In addition, it adjusts the calculation of leverage ratio for banks. This is progressing with implementation under way (deadline mid-2025). Basel III leverage ratio definition updated, on- and off-balance sheet exposure better captured in SARB/PA regulatory rules. Revised ratio has been implemented and a sector-wide audit is scheduled with technical guidance released by SARB/PA.

Canvas not supported.

Is it working?

The reform is almost complete, with final compliance steps implemented in July 2025. Subsequently, the prudential authority (PA) confirmed in its regulatory publications and directives that the revised leverage ratio exposure definition, part of the Basel III post-crisis reform became operational on 1 July 2025. Leverage ratio incorporated, stress tests confirm sector strength.

Actions

Banks are well above the minimum leverage ratio and the revised definition has improved comparability and transparency. Sector-wide implementation complete and the regulators are proactive in monitoring.

Are there plans?

Regulatory amendments and new disclosure templates have been rolled out, with public reporting now standard. There will be biannual reporting, capital adequacy monitoring along with audit-of-exposure calculations.

Is it on the agenda?

The SARB/Prudential Authority have made this a key Basel III deliverable, with phased implementation and industry reporting. This is a key SARB/PA deliverable in annual stability strategy - planned for rolling audits and reviews.

Goals

To strengthen the leverage ratio as a backstop to risk-based capital requirements and enhance transparency. The main goal is to capture off/on-balance sheet risks and ensure capital adequacy.

References

Departments / Govt Institutions

National Treasury South African Reserve Bank (SARB)

Summary

As part of the Basel III post‑crisis package, the Prudential Authority (PA) is amending the Regulations Relating to Banks to implement: (i) the revised Basel III exposure‑measure definition; (ii) a minimum leverage‑ratio requirement consistent with Basel standards; and (iii) an additional leverage‑ratio buffer for domestic systemically important banks (D‑SIBs). Draft 23 of the proposed amendments and the accompanying statement of need, expected impact and intended operation explain changes to the measurement of derivatives (replacement cost plus add‑ons, with limited recognition of client‑cleared margins), SFTs, and off‑balance‑sheet items, and how these interact with the risk‑based capital framework already set out in Directive 5 of 2021.The deliverable is a set of Regulatory amendments under the Banks Act that codify: (i) the Basel‑aligned leverage‑ratio exposure measure; (ii) minimum leverage‑ratio requirements for all banks; and (iii) leverage‑ratio buffers for D‑SIBs, effective from 1 July 2025, in step with other Basel III post‑crisis elements. The amendments are contained in Draft 23 to the Regulations and are supported by detailed PA reporting templates and supervisory guidance.

Canvas not supported.

Is it working?

The reform is advancing but is not yet fully finalised, with the domestic rule text and roadmap substantially complete and broadly aligned with Basel III. The key implementation questions relate to calibration for D‑SIBs, interaction with the output floor and risk‑based requirements and ensuring that the leverage ratio does not unduly constrain low‑risk, balance sheet‑intensive activities that support market liquidity and infrastructure.

Actions

Concrete steps already taken include: (i) issuing Draft 23 of the proposed regulatory amendments, which incorporates the revised leverage‑ratio exposure definition and D‑SIB buffers; (ii) publishing the statement of need, expected impact and intended operation, which includes QIS‑based analysis of the leverage ratio’s impact across the sector; and (iii) conducting industry consultations, including technical engagement sessions and professional‑body briefings on Basel III post‑crisis reforms.

Are there plans?

The PA’s consultation on Basel III implementation outlines plans to: (i) finalise the leverage‑ratio exposure‑definition amendments and D‑SIB buffers alongside the credit‑risk and operational‑risk changes; (ii) monitor the impact of the leverage ratio on business models, particularly for low‑risk, high‑volume activities such as repo, SFTs and central‑clearing; and (iii) integrate leverage‑ratio monitoring into the broader supervisory review and evaluation process (SREP), including interaction with the output floor and risk‑based capital requirements. Future proportionality work, referenced in budget 2026, may further refine application to smaller banks.
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Is it on the agenda?

The 2026 Budget Review, (Financial sector update) notes that South Africa is finalising implementation of Basel III post‑crisis reforms, including leverage‑ratio changes and buffers for systemically important institutions, as part of a broader prudential‑reform agenda to strengthen financial stability and align with evolving international standards. The PA’s Regulatory Strategy 2025-2030 lists completion of Basel III leverage‑ratio reforms and proportionality work for smaller institutions as explicit priorities.

Goals

To align South Africa’s leverage‑ratio exposure measure (LRE) with the final Basel III standard by refining the treatment of off‑balance sheet items, derivatives, securities financing transactions and central bank reserves, so that the leverage ratio remains a simple, non‑risk‑based backstop that is still coherent with local market structures.

References

Departments / Govt Institutions

National Treasury South African Reserve Bank (SARB)

Summary

As part of the Basel III post‑crisis package, the Prudential Authority (PA) is amending the Regulations Relating to Banks to implement: (i) the revised Basel III exposure‑measure definition; (ii) a minimum leverage‑ratio requirement consistent with Basel standards; and (iii) an additional leverage‑ratio buffer for domestic systemically important banks (D‑SIBs). Draft 23 of the proposed amendments and the accompanying statement of need, expected impact and intended operation explain changes to the measurement of derivatives (replacement cost plus add‑ons, with limited recognition of client‑cleared margins), SFTs, and off‑balance‑sheet items, and how these interact with the risk‑based capital framework already set out in Directive 5 of 2021.The deliverable is a set of Regulatory amendments under the Banks Act that codify: (i) the Basel‑aligned leverage‑ratio exposure measure; (ii) minimum leverage‑ratio requirements for all banks; and (iii) leverage‑ratio buffers for D‑SIBs, effective from 1 July 2025, in step with other Basel III post‑crisis elements. The amendments are contained in Draft 23 to the Regulations and are supported by detailed PA reporting templates and supervisory guidance.

Canvas not supported.

Is it working?

The reform is advancing but is not yet fully finalised, with the domestic rule text and roadmap substantially complete and broadly aligned with Basel III. The key implementation questions relate to calibration for D‑SIBs, interaction with the output floor and risk‑based requirements and ensuring that the leverage ratio does not unduly constrain low‑risk, balance sheet‑intensive activities that support market liquidity and infrastructure.

Actions

Concrete steps already taken include: (i) issuing Draft 23 of the proposed regulatory amendments, which incorporates the revised leverage‑ratio exposure definition and D‑SIB buffers; (ii) publishing the statement of need, expected impact and intended operation, which includes QIS‑based analysis of the leverage ratio’s impact across the sector; and (iii) conducting industry consultations, including technical engagement sessions and professional‑body briefings on Basel III post‑crisis reforms.

Are there plans?

The PA’s consultation on Basel III implementation outlines plans to: (i) finalise the leverage‑ratio exposure‑definition amendments and D‑SIB buffers alongside the credit‑risk and operational‑risk changes; (ii) monitor the impact of the leverage ratio on business models, particularly for low‑risk, high‑volume activities such as repo, SFTs and central‑clearing; and (iii) integrate leverage‑ratio monitoring into the broader supervisory review and evaluation process (SREP), including interaction with the output floor and risk‑based capital requirements. Future proportionality work, referenced in budget 2026, may further refine application to smaller banks.
rn

Is it on the agenda?

The 2026 Budget Review, (Financial sector update) notes that South Africa is finalising implementation of Basel III post‑crisis reforms, including leverage‑ratio changes and buffers for systemically important institutions, as part of a broader prudential‑reform agenda to strengthen financial stability and align with evolving international standards. The PA’s Regulatory Strategy 2025-2030 lists completion of Basel III leverage‑ratio reforms and proportionality work for smaller institutions as explicit priorities.

Goals

To align South Africa’s leverage‑ratio exposure measure (LRE) with the final Basel III standard by refining the treatment of off‑balance sheet items, derivatives, securities financing transactions and central bank reserves, so that the leverage ratio remains a simple, non‑risk‑based backstop that is still coherent with local market structures.

References

Departments / Govt Institutions

National Treasury South African Reserve Bank (SARB)

Analyst: Tinashe Kambadza
Status: in-progress
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