The Leverage Ratio and Bank Capital Requirements

The financial crisis focused attention on the issue of the appropriate minimum requirements for the capital banks must hold as a critical safety buffer. It has recently become clear that the leverage ratio, essentially the ratio of capital to total assets, will be increasingly important relative to other capital requirements.

On Thursday, October 31, the Economic Studies program at Brookings hosted an event that explored bank capital requirements, the role of the leverage ratio, how it should be calculated and the minimum level set. Fellow in the Initiative on Business and Public Policy Douglas Elliott introduced the topic. Martin Baily, Senior Fellow in Economic Studies and Director of the Initiative on Business and Public Policy, served as moderator for the first panel on the role of bank capital requirements. Douglas Elliott moderated the second panel on calculating the leverage ratio and what the minimum should be.