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Leverage Ratios for Different Bank Business Models

David Grossmann ()
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David Grossmann: Andrássy University Budapest and Claussen-Simon Graduate Centre at HSBA, Alter Wall 38, 20457 Hamburg, Germany

Credit and Capital Markets, 2017, vol. 50, issue 4, 545-573

Abstract: The development of the Basel III leverage ratio does not consider the different risk characteristics of bank business models. All banks have to achieve the same requirements even if a high-risk business model is chosen. For that reason, leverage ratios which are adjusted to the risk-profile of retail, wholesale, and trading banks are developed. Based on Value-at-Risk and Expected Shortfall calculations, the left-hand tail of a net return on non-risk-weighted assets distribution of 120 European banks is analyzed. Retail banks are less risky and can withstand financial distress with a smaller amount of capital.

JEL-codes: G21 G28 G32 (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:kuk:journl:v:50:y:2017:i:4:p:545-573