Basel III: Leverage ratioens indvirkning på de danske kreditinstitutter og deres forretningsmodeller

Olivier Vandenbroucke Moldrup Hollesen

Studenteropgave: Kandidatafhandlinger


This thesis provides an analysis and detailed description of the impact of the leverage ratio under the Basel III framework on credit institutions and their business models in Denmark. Through extensive analysis of 68 Danish credit institutions, and a detailed classification of their business models using cluster analysis, four business model archetypes are identified: Wholesale Institutes, Investment Institutes, Retail Focused Institutes and Retail Diversified Institutes. The archetypes lay the foundation for understanding the leverage ratio’s role in each business model, and provide a platform for discussing whether the leverage ratio in its current form fulfils its role as a financial regulation. Answering the research question “What are the effects of the leverage ratio on Danish credit institutions and their business models?” it is identified that the non risk-based leverage ratio in conjunction with the risk-based capital requirements may give credit institutions unintended incentives for seeking out assets that have higher credit risk. Moreover, through the quantitative analysis conducted in this thesis, it is found that the average leverage ratio was around 5 per cent lower, and therefore more leveraged, for the Investment Institutes compared to the remaining archetypes identified. Furthermore, the thesis identifies that only one Danish credit institution would currently be constrained by the 3 per cent leverage ratio, questioning whether the leverage ratio should be differentiated for different business models to act as a meaningful “backstop” measure. Based on the analysis and its results it is recommended that further research into the effects of the leverage ratio should be conducted, in order to understand whether the current ‘one size fits all’ is the most effective approach to reinforce the risk-based requirements. As such, it is vital that both credit institutions and regulators are aware of the intrinsic limitations and weaknesses of the leverage ratio. It is important to note that the role of this thesis is not to recommend how to restrict the build-up of leverage in the banking sector, and thereby how to avoid financial crisis in the future, but rather to highlight the issues pertaining to the leverage ratio and its effect on Danish credit institutions’ business models. Moreover, the thesis does not aim to access, which levels of the leverage ratio would be appropriate for each of identified business model.

UddannelserCand.merc.fir Finansiering og Regnskab, (Kandidatuddannelse) Afsluttende afhandling
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