Leverage Ratio

Glossary

Banking

Leverage Ratio

The Leverage Ratio is a core component of the so-called Basel III regulatory accord. It is calculated by dividing a bank’s supervisory Tier 1 capital by total exposures (assets). A low leverage ratio indicates a high level of debt relative to Tier 1 capital. EU banks have had to meet a minimum 3% leverage ratio since 2018. Minimum leverage ratio requirements as defined in the Capital Requirements Regulation have been binding on EU banks since June 2021.

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