Germany’s Bundesbank is eyeing a shortcut for small and medium-sized banks. Basel capital rules could be scrapped in favor of a single leverage ratio. No risk-weighting. No buffers. Just raw exposure. https://finanz-szene.de/banking/bundesbank-erwaegt-verzicht-auf-basel-anforderungen-fuer-kleinbanken/
The leverage ratio was never meant to stand alone. It’s a backstop, not a blueprint. “Before a small commercial bank would breach a leverage ratio, the capital ratios would be long breached by then.” It’s the last line of defense, not the first.
Basel III hits small banks harder than large ones. Bundesbank studies show it may particularly hamper SME financing, the lifeblood of the economy. https://www.bundesbank.de/resource/blob/881518/3483eed970cb5f65367a48cd2b7c3f94/mL/2022-10-04-dkp-37-data.pdf
The Basel III Endgame rules are tightening. Strengthening the banking system is estimated to push common equity tier 1 capital requirements up 16 percent for affected bank holding companies. https://www.federalreserve.gov/newsevents/pressreleases/bcreg20230727a.htm
Experts warn of a backfire. The new framework could crush small banks and harm ordinary people. https://www.brusselsreport.eu/2025/04/01/new-basel-banking-regulations-may-put-smaller-banks-out-of-business/
No one explains how a leverage-only system manages liquidity mismatches, asset duration gaps, or stress testing. The omission is deafening.
The leverage ratio was built for investment banks, not small lenders. It’s like strapping a Formula 1 crash helmet on a tricycle. Wrong tool. Wrong context. Wrong risk.
Bundesbank’s shortcut isn’t reform. It’s retreat. When the next shock hits, small banks will have no buffers. Just exposure. And excuses.
