Yesterday Bloomberg ran a qualitative story on how much capital U.S. banks need. The story mentions some percentages, and then settles for a leverage ratio of 20%. However, the author of the article, James Greiff, offers no numerical support for the 20%. So, here are some numbers. Using data from U.S. Bank Holding Companies, I… Read More How much capital U.S. banks need, some numbers
One way a bank can manage its solvency is by changing the denominator of its solvency ratio, in this case of its BIS ratio. (The BIS ratio is the ratio of capital divided by Risk Weighted Assets often refereed to as RWA). The plot below shows holdings of assets that are categorized as available for… Read More Solvency management by the denominators
There is lots of talk going on about bank leverage. But how does it look? The plot below shows solvency ratios for U.S. banks (red) and U.S. corporates (blue). It looks different. Note, these are observations for the U.S. over years 1985-2012. Solvency is defined as accounting equity divided by total assets. Graphs are made… Read More Leverage of U.S. Banks and Corporates, a graph.