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Published: 8th October 2009 by William Webster
In the esoteric world of financial markets why is leverage so important? Because for banks it's the very thing that can increase the magnitude of profits. That's very attractive if your remuneration is linked to these profits. But excessive leverage increases the probability of bankruptcy. The cost of which is not borne by those who benefit in the good times. Few would dispute this is a conflict of interest. The problem is that restricting leverage is notoriously difficult. There is a world of difference between reported leverage and real leverage. Let's see why.
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Real and reported leverage. How dealers leverage. Capital ratios. Leverage & Derivatives, structured credit & off balance sheet financing. Leverage ratios.
25th March 2017
The following is an introduction to bank regulatory capital. This is the amount of capital that the authorities require a bank to hold. It’s a complex topic and has a lot of interested parties. They include banks, taxpayers, regulators and politicians. That’s because increased capital reduces risk but costs banks and potentially may lead a slowdown in the growth of credit.