3 moving away from risk - oriented banking regulation? introducing the leverage ratio as the primary regulatory requirement would mean taking two steps back to the risk - insensitivity of basel i and even beyond. why is this a headache for me? there is a danger that we will effectively end up with a leverage ratio only, because a sufficiently high leverage ratio requirement will override the calculation of risk - weighted assets. why is this? let me draw your attention to one result from the recently published basel iii monitoring exercise. only 30 % of the large, international banks analysed is more easily able to fulfil a risk - based tier 1 capital ratio of 8. 5 % ( including the capital conservation buffer ) than a 3 % leverage ratio, which is the ratio the basel committee favours. this does not look very balanced to me, yet voices from the regulatory community, such as fdic vice chairman thomas hoenig or fed governor daniel tarullo, have recently proposed going higher. daniel tarullo is advocating a leverage ratio of 6 % for globally systemically important banks ( g - sibs ), for example. and economists like martin hellwig are even more radical ; they are bis central bankers ’ speeches suggesting that banks should hold minimum capital of 20 % to 30 %, relative to their non - risk weighted assets. as a practitioner i can only marvel at such notions. such a step requires thorough consideration and careful analysis – not only regarding the definition and level of capital, but also regarding the transitional period – and i am therefore far from being convinced that we should take such a radical step. what should we do instead? my answer is straightforward : we should stick to the basel iii timeline. under the basel iii timeline, banks will be required to disclose their leverage ratios as of 2015, which allows both the supervisors and the investors to use it as an indicator for bank risk. however, the definition will remain under review until 2018, when the decision about its introduction as a binding “ pillar 1 ” requirement will eventually be taken. i believe that we should use this parallel run period for further analyses regarding the leverage ratio ’ s interaction with risk - based capital requirements, regarding the undesirable incentives it may potentially create, and regarding its impact on low - risk business models. 4. conclusions to be absolutely clear : i am not against a leverage ratio. supervisors should actually make use of a leverage ratio, but they should also rely on a risk - sensitive measure. a

the economy has been expanding. the economy has been expanding. kinki the economy has been expanding moderately. the economy has been expanding moderately, with its growth becoming more solid. chugoku the economy has been expanding moderately. the economy has been expanding moderately. shikoku the economy has continued to recover moderately. the economy has continued to recover moderately. kyushuokinawa the economy has been expanding moderately. the economy has been expanding moderately. source : bank of japan. chart 7 labor market conditions unemployment rate and active job openings - to - applicants ratio s. a., ratio s. a., % diffusion index of employment conditions ( tankan ) reversed, di ( " excessive employment " minus " insufficient employment " ), % points insufficient employment unemployment rate ( right scale ) excessive employment active job openings - to - applicants ratio ( left scale ) active job openings - to - applicants ratio for full - time employees ( left scale ) cy cycy sources : ministry of internal affairs and communications ; ministry of health, labour and welfare. source : bank of japan. chart 8 " outlook for economic activity and prices " ( january 2018 ) forecasts of the majority of policy board members y / y % chg. fiscal 2017 forecasts made in october 2017 fiscal 2018 forecasts made in october 2017 fiscal 2019 forecasts made in october 2017 real gdp cpi ( all items less fresh food ) + 1. 8 to + 2. 0 + 0. 7 to + 1. 0 [ + 1. 9 ] [ + 0. 8 ] + 1. 7 to + 2. 0 + 0. 7 to + 1. 0 [ + 1. 9 ] [ + 0. 8 ] + 1. 3 to + 1. 5 + 1. 3 to + 1. 6 [ + 1. 4 ] [ + 1. 4 ] + 1. 2 to + 1. 4 + 1. 1 to + 1. 6 [ + 1. 4 ] [ + 1. 4 ] + 0. 7 to + 0. 9 + 1. 5 to + 2. 0 [ + 0. 7 ] [ + 1. 8 ] + 0. 7 to + 0. 8 + 1. 5 to + 2. 0 [ + 0. 7 ] [ + 1. 8 ] source : bank of japan. note : figures in brackets indicate the medians of the policy board members'forecasts ( point estimates ). chart 9 cpi 2. 0 s. a., y / y