The Leverage Ratio : A New Binding Limit on Banks
Excessive leverage by banks is widely believed to have contributed to the global financial crisis. To address this, the international community has proposed the adoption of a non-risk-based capital measure, the leverage ratio, as an additional prud...
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| Format: | Brief |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2009/12/11800141/leverage-ratio http://hdl.handle.net/10986/10224 |
| Summary: | Excessive leverage by banks is widely
believed to have contributed to the global financial crisis.
To address this, the international community has proposed
the adoption of a non-risk-based capital measure, the
leverage ratio, as an additional prudential tool to
complement minimum capital adequacy requirements. Its
adoption can reduce the risk of excessive leverage building
up in individual entities and in the financial system as a
whole. The leverage ratio has inherent limitations, however,
and should therefore be considered as just one of a set of
macro- and micro-prudential policy tools. |
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