15 Percent Tier 1 Leverage: Undercapitalized?

Law360, New York (December 19, 2011, 6:01 PM EST) -- Managing the Tier 1 capital ratio, or leverage ratio, is a key pillar of successful banking. Maintaining an excessively elevated Tier 1 ratio will in most instances produce an underleveraged balance sheet that results in operating losses.[1] If you sanction excessive capital erosion, your federal and state bank regulators will be howling while subjecting your bank to the strictures of prompt corrective action.

Leverage of capital, supported by the full faith and credit of the federal government in the form of FDIC insurance, is what makes...
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