Leverage ratio refers to the ratio of total assets to equity capital in the balance sheet. Leverage ratio is an indicator to measure the debt risk, which reflects the repayment ability from the side. The reciprocal of leverage ratio is leverage multiple. The higher the leverage ratio, the more easily it is affected by the rate of return and loan interest rate. Lever is a double-edged sword. When the enterprise is profitable, increasing leverage can expand profits, but if it is added too much, the risk will rise. Therefore, high leverage not only brings benefits, but also magnifies risks.

Advantages of leverage ratio:

Introducing leverage ratio as a supplementary means of capital supervision has the following advantages:

First, it reflects the role of real money contributed by shareholders in protecting depositors and resisting risks, which is conducive to maintaining the minimum capital adequacy ratio of banks and ensuring that banks have a certain level of high-quality capital (common stock and retained profits).

Second, it can avoid the complexity of weighted risk capital adequacy ratio and reduce the space of capital arbitrage. The lessons of this financial crisis show that under the framework of the New Capital Accord, if commercial banks take advantage of the complexity of the New Capital Accord to carry out regulatory arbitrage, it will seriously affect the capital level of banks. Relevant data show that the core capital adequacy ratio and leverage ratio of some banks deviate. At the end of 2008, the core capital adequacy ratio of Credit Suisse was 13. 1%, but the leverage ratio was only 2.9%. UBS's core capital adequacy ratio is 1 1.5%, but its leverage ratio is only 2.6%. By introducing leverage ratio, we can avoid too complicated measurement problems and control the risk of risk measurement.

Third, it is conducive to controlling the excessive growth of bank balance sheets. By introducing leverage ratio, controlling the scale of capital expansion within a certain multiple of the bank's tangible capital is conducive to controlling the excessive growth of the balance sheet of commercial banks.