IBANK 3.4.2 Objectives of leverage ratio requirements

The leverage ratio supplements the risk-based capital requirements of the rest of this Chapter. The objectives of limiting Islamic banking business firms' leverage ratios are as follows:

(a) to constrain the build-up of leverage in the Islamic banking sector, to help avoid destabilising deleveraging that can damage the broader financial system and the economy;
(b) to reinforce the risk-based requirements in Parts 3.1 to 3.3 with a simple, non-risk-based backstop measure;
(c) to serve as a broad measure of the sources of leverage, both on and off the balance-sheet.
Inserted by QFCRA RM/2019-7 (as from 1st January 2020).