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Leverage ratio
The leverage ratio is a simple indicator of the ability of a bank or building society to absorb losses. Leverage ratio = Capital / Exposures
The leverage ratio refers to the share of the total value of a firm’s assets and its other commitments (referred to as ‘exposures’) that is funded with high-quality capital capable of absorbing losses while a firm is a ‘going concern’. The lower the leverage ratio, the more than a commercial bank or building society relies on debt to fund their activities