Crude but credible
Regulators are warming to the idea of introducing a leverage ratio to limit the excessive build-up of assets on bank balance sheets. But they face an uphill battle to create an internationally consistent measure that addresses differences in accounting treatment. By Joel Clark
Among the reams of reports published in the past year by regulators and political bodies to dissect the causes of the financial crisis and the responses needed, the suggestion of a leverage ratio has appeared repeatedly. In particular, rule-makers have pointed to heavy increases in assets relative to capital - commonly known as leverage - on bank balance sheets in recent years as one of the key causes of the current crisis.
Some regulatory bodies, including the Basel Committee on Banking
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