That's why a low leverage ratio is not a guarantee that a bank is safe.
The regulators behind the Basel rules have tended to think a leverage ratio is too unsophisticated.
It will suggest incorporating a leverage ratio into bank-capital requirements, to supplement the existing risk-weighting of assets.
The main complaint is for a higher leverage ratio that will measure actual equity against total assets.
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Which brings us back to where we started, the bloomin' gross leverage ratio.
Nothing wrong with that, except that the leverage ratio explicitly excludes lending the banks undertake domestically from calculations of capital.
Its leverage ratio has fallen to 14, half its pre-crisis level though still much higher than that of a typical commercial bank.
American commercial banks were subject to a leverage ratio in the run-up to the financial crisis: they still ran into trouble.
The temptation is to add further measures to restrict their wiggle-room (Basel 3 uses both risk weights and a leverage ratio).
Lehman realized a benefit by using the cash received to pay down other liabilities for a temporary improvement in the leverage ratio.
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In other words, if the Basel lll leverage ratio remains at 3%, then that is the ratio which will apply to British banks.
At the time of its demise, Bear Stearns was overextended by a leverage ratio of 30-to-1 (the ratio of money leant out vs. capital on hand).
At a leverage ratio of 71:1, Grant writes, the New York Fed should be the first to be lining up executors and filing an end-of-life plan.
Whether a so-called gross leverage ratio of 20 achieves the correct balance between risks and rewards is moot: some would argue it should be lower still.
Wells also boasts a Tier 1 capital ratio of 11.5%, total capital ratio of 14.51% and Tier 1 leverage ratio of 9.4% to end the third quarter.
Now although the chancellor has implemented most of Vickers' many proposals to strengthen banks, on the leverage ratio he has decided that the UK cannot go beyond the new international norm.
Because any leverage ratio is being seen - in Basel and Westminster - as a backstop, or only a bit of background insurance in case the Basel rules prove inadequate yet again.
Since the middle of 2007, Morgan Stanley has raised about twenty billion dollars in new capital and cut in half its leverage ratio the total value of its assets divided by its capital.
So all else being equal, which they never are of course, a bank with a lower leverage ratio is a safer bank, because it has relatively more capital to protect depositors from losses.
"With its high leverage ratio to tangible common equity, we believe Lehman needs to raise substantial capital regardless of market conditions in order to take its needed write-downs, " Einhorn said in an email Tuesday.
While many U.S. banks still have leverage ratios that are 10 times their assets, the banks of Germany have a leverage ratio 32 times their assets, and French banks are leveraged 26 times their assets.
In fact a bank with a leverage ratio of infinity run by individuals with god-like knowledge of the true risks of lending would be safer than a bank run by mortals whose leverage ratio is tiny.
There is no serious discussion of the idea that a low leverage ratio should be the first line of defence, and that the Basel risk-weighting rules should be less prescriptive and more in the form of guidance.
Certainly conservatively run community banks pose a much lower risk to our financial system at a 6% leverage ratio, compared to a large TBTF organization with still undefined ties with multiple counter-parties, and with proprietary trading operations.
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And he has a concern that building societies and mortgage banks would cut back on important lending to the housing market, in that they would be most immediately and directly affected by a cut in the leverage ratio.
As it happens, the Basel gurus are introducing a 33-to-1 gross leverage ratio - which many would see as a step in the right direction, but British MPs and lords on the standards commission think is too high.
There still exists genuine demand for property, and the leverage ratio in the country's property market is low, as banks require higher down payments from home buyers, they wrote, adding that the decline in property prices is a result of government action, rather than a turnaround in the market.
Would it be criminally insane to trust the banks with more discretion about how they lend and invest, so long as they never breached a relatively low leverage ratio (which research indicates might need to be as low as 10 to one, and certainly no more than 20 to one)?
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