// definition
Leverage ratio
Bank capital relative to exposure
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Short definition
A prudential ratio dividing Tier 1 capital by an exposure measure that includes assets and certain off-balance-sheet commitments, without risk weights. It complements risk-weighted capital ratios. The applicable threshold depends on the jurisdiction, institution and required buffers; SLR and eSLR refer to specific US requirements.
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Intuition
The ratio compares capital with a regulatory exposure measure. It does not measure immediately available cash.
Formula
leverage ratio = Tier 1 capital / exposure measure