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 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.

Bibliographic Details

Main Author:	D'Hulster, Katia
Language:	English
Published:	World Bank, Washington, DC 2009-12
Subjects:	ACCOUNTING, ACCOUNTING PRINCIPLES, ARBITRAGE, ASSET BASE, ASSET PRICES, ASSET-BACKED SECURITIES, ASSET-LIABILITY MISMATCH, ASSETS, BALANCE SHEET, BALANCE SHEETS, BANK ASSETS, BANK BALANCE SHEET, BANK EQUITY, BANK FOR INTERNATIONAL SETTLEMENTS, BANK HOLDING, BANK HOLDING COMPANIES, BANK HOLDING COMPANY, BANKING CRISIS, BANKING SECTOR, BANKING SUPERVISION, BANKING SYSTEM, BANKING SYSTEMS, BROKER, BROKER DEALER, BROKER DEALERS, BUSINESS CYCLE, CAPITAL ACCORD, CAPITAL ADEQUACY, CAPITAL ADEQUACY REQUIREMENTS, CAPITAL REQUIREMENT, CAPITAL REQUIREMENTS, CASH FLOWS, CONSOLIDATION, CORPORATE BONDS, CORRECTIVE ACTION, CREDIT EXPOSURES, CREDIT INSTRUMENTS, CREDIT PRODUCTS, CREDIT RISK, DEBT, DEBT OBLIGATION, DEPENDENT, DERIVATIVES, DIRECT INVESTMENT, DOMESTIC CREDIT, DOMESTIC CREDIT MARKET, EMERGING-MARKET, EQUITY FUND, EXCHANGE COMMISSION, EXPOSURE, EXPOSURES, FEDERAL RESERVE, FEDERAL RESERVE BANK, FEDERAL RESERVE BANK OF NEW YORK, FINANCIAL CRISIS, FINANCIAL INNOVATION, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL MARKETS, FINANCIAL REFORMS, FINANCIAL REPORTING, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL STABILITY, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FUTURE CASH FLOWS, GLOBAL BANKING, GLOBAL FINANCIAL SYSTEM, HOLDING COMPANIES, HOLDING COMPANY, INDEBTEDNESS, INDIVIDUAL BANK, INDIVIDUAL BANKS, INDIVIDUAL FIRM, INSTRUMENT, INTANGIBLE, INTANGIBLE ASSETS, INTANGIBLES, INTERNATIONAL BANKING, INVESTMENT BANK, INVESTMENT BANKS, JURISDICTION, JURISDICTIONS, LENDING PRACTICES, LETTERS OF CREDIT, LEVERAGE, LEVERAGE RATIO, LEVERAGE RATIOS, LIABILITY, LIQUIDITY, LIQUIDITY RISK, LOAN, LOAN GUARANTEE, LOAN LOSS, LOAN LOSS PROVISIONS, LONG-TERM ASSETS, MARKET RISK, MONETARY FUND, MONETARY POLICY, NET CAPITAL, POLICY RESPONSE, POLICY RESPONSES, PORTFOLIO, PORTFOLIOS, PRIVATE SECTOR DEVELOPMENT, PROMPT CORRECTIVE ACTION, PRUDENTIAL REGULATION, PUBLIC POLICY, RECEIVABLES, REGULATOR, REGULATORY AGENCIES, REGULATORY CAPITAL, RESERVE BANK, RESERVES, RETURN, RETURN ON EQUITY, RISK PROFILE, RISK PROFILES, RISK SENSITIVITY, SETTLEMENTS, SHORT-TERM LIABILITIES, SUBSIDIARIES, SUPERVISORY AGENCY, TAX, TIER 1 CAPITAL, TRANCHES, TRANSACTION, VALUATION, WHOLESALE MARKETS,
Online Access:	http://documents.worldbank.org/curated/en/2009/12/11800141/leverage-ratio https://hdl.handle.net/10986/10224
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