The Leverage Ratio over the Cycle¶
Brei, M., & Gambacorta, L. (2014). The Leverage Ratio over the Cycle. BIS Working Papers.
Cited by¶
1 citation across 1 artifact.
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Mechanisms¶
- Utilization / Leverage Cap
- A cap set too conservatively wastes usable capacity every calm year against a shock that is genuinely rare; a static cap can be simply wrong as conditions change; and a hard limit invites gaming — moving exposure off the measured book to keep the headline ratio clean.
This sourceFinds that the effective constraint imposed by a leverage ratio varies over the financial cycle, tightening in booms and loosening in recessions.
- A cap set too conservatively wastes usable capacity every calm year against a shock that is genuinely rare; a static cap can be simply wrong as conditions change; and a hard limit invites gaming — moving exposure off the measured book to keep the headline ratio clean.
Verification¶
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