Since financial institutions are subjected to increasingly tighter requirements regarding the way they conduct their loan business, we could assume that built-in regulatory pressures induce them to adopt collective business strategies, with the unintended consequence of persistently weakening...

Traditional leverage ratios assume that bank equity captures all changes in asset values. However, in the context of market-oriented banking, capital can be funded by additional debt or asset sales without directly influencing equity. Given the new sources of liquidity generated by...

In order to complement the macro-prudential framework introduced in Basel III, we propose a new breed of indicators based on the degree of leverage which helps track the time-varying dimension of bank systemic risk—a key aspect of financial stability. Given the new sources of liquidity...