I updated this post, as discussion on the leverage ratio still suffer from poor understanding of this solvency measure.
I updated this post, as discussions on the leverage ratio still suffer from a poor understanding of this solvency measure. See my post on this odd proposal by three Dutch professors, who basically want to turn back time to the Basel II (not III) era, and allow banks to borrow money to increase their capital ratios.
This post presents some eye-openers on the leverage ratio and Basel III solvency ratios. Discussions on the leverage ratio have gained momentum. However, the discussions on this measure of solvency sometimes lack rigour, which leads to poor inferences.
Small changes in the amount of capital held by a bank can have significant effects on a bank’s business. Therefore it is important to use consistent definitions and measure data correctly. I will focus on Basel III, as this standard is being implemented, and, apparently not always well understood.
So, time to open your eyes on…
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