DISCUSSION

Basel 3 committee perceives the importance of the leverage. In this review, almost all of the researchers remind the threat and the contribution of leverage to the crisis. The researchers argue in favour of tightening leverage regulation. Authors postulate that a tighter management of bank leverage will lead to more stable banking environment

Quantitative approach is the most used approach in the studies. In the studies after Basel 3, most of researchers analyze data from the periods from before to after 2007. Previous research benefited from the financial crisis, because crisis provided an unique situation.

Meanwhile most of theoretical studied pointed directly to the indicators which regulators should consider better risk management.

The suggestions of the studies both on- and off-balance-sheet are more addressable to the control of leverage component while the studies of derivatives mostly point to the need of

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banks’ discipline and disclosure. The derivatives are considered as the riskiest activities because they expose relates to many factors. Risks related to the Credit derivatives are higher than other derivatives’ risks. To manage credit derivatives, regulators need more information and the honesty of banks about their off-balance-sheet and their real loan loss. From the suggestions obtained from reviewed studies, Jarrow’s (2013) “hair cut information”

suggestion is the most interesting because of its simplicity and usefulness for the regulators when they compare the leverages of several banks. Cathcart et al. (2015) is a one of a few studies which approaches and suggests a method that may combine capital ratio and leverage ratio requirement. Along the “Phase-in Arrangement” of Basel 3, these two requirements will be in included in the pillar 1 altogether.

Interest rate, house price, GDP, and unemployment indicator may affect bank risk indirectly.

5

CONCLUSION

During the “Phase-in Arrangement” of Basel 3, leverage ratio is monitored as a parallel criterion with capital ratio. In January 2018, leverage ratio is going to be immigrated to pillar 1 together with capital ratio. Time from now until then, we will discover more from the related studies. Meantime, the previous studies, which are reviewed in this paper, are important for researchers in this area.

Findings obtained though this literature review point to two important issues that researchers should pay attention to. First, derivatives. Especially credit derivatives have more effect on the bank risks than the other factors. Second, the disclosure is needed to manage the bank risk. Reviewed studied suggest some indicators, parameters and point to information that regulator should consider. However, there are no suggestions for a particular criterion of leverage ratio component.

Research of banking, finance and related sciences mostly contributed to Basel regulation framework. We expect that the further studies will give the Basel Committee better suggestions for full application of Basel 3.

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Contact information Tung Thanh Ho Affiliation:

PhD student of Faculty of Management and Economic, Tomas Bata University in Zlin, Czech.

Republic.

Lecturer of Faculty of Finance and Banking, Ton Duc Thang University, Hochiminh city, Vietnam.

Nam T.G.Masaryka 3050, Zlin 76001, Czech Republic hothanhtung@tdt.edu.vn

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