Leverage Limits May Drive Banks To Risky Assets, Experts Say

Law360, Washington (October 31, 2013, 4:50 PM EDT) -- A Stanford University economist and two banking executives said Thursday that they were skeptical of recent proposals to add more leverage constraints on big banks in order to add stability to the financial system, saying the proposals could lead banks toward riskier assets.

In a Brookings Institute panel discussion on bank capital requirements and the so-called leverage ratio, Stanford finance professor Darrell Duffie said proposals to increase the ratio — which requires banks to measure the total capital held against their total unadjusted assets — might...
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