The Leverage Ratio as a Bank Discipline DeviceReport as inadecuate

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1 LAPE - Laboratoire d-Analyse et de Prospective Economique

Abstract : This paper investigates bank portfolio composition under Basel II where the amount of required capital is determined by bank-s own risk assessment. We particularly show that in presence of asymmetric information between the bank and the supervisor, it has incentives to understate its risk taking which could be curbed by the addition of the simple leverage ratio as suggested in Basel III.

Keywords : bank capital buffer prudential regulation Basel accords

Author: Clovis Rugemintwari -



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