The financial crisis has put to the forefront the long-debated issue of banks’ capital adequacy, showing that banks were much more fragile than they (and their regulators) pretended, also because they were allowed to push their leverage to levels much higher than any industrial company, or even a hedge fund, has never dreamt of.
European banks: Between a rock (need of more capital) and a hard place (low profitability)
Marco Onado, 23 February 2014
Assessing leverage in the financial sector through flow data
Javier Villar Burke, 14 November 2013
The build-up of leverage in the banking sector played a prominent role in the Global Crisis.1 A standard description the role of leverage corresponds with the typical profile of a financial bubble as reflected in the evolution of the banks of the Eurostoxx 50 (Figure 1).
What is the optimal leverage for a bank?
David Miles, 27 April 2011
At the height of the financial crisis, many highly leveraged banks found that their sources of funding disappeared – withdrawn due to fears over the scale of losses. In the fallout from this banking crisis, the economic damage has been enormous.
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