Leverage rumpus: Banks protest impact of ratio revisions

risk1013-csfinal-stephen-lee

In modern cars, the airbag is the backstop – a safety measure that deploys when everything else has failed. In modern banks, the leverage ratio is intended to do something similar. But revisions proposed to the ratio in June would turn it from backstop into binding constraint, banks claim – overwhelming a battery of more sensitive safeguards, such as internally modelled risk-weighted assets (RWAs), and potentially making banks harder to manage. A bit like a car in which the airbag