Key Charts - Bank Regulation

Are Higher Leverage Ratios Behind Banks’ Lower Return on Equity?
  • Since the financial crisis, banks’ return on equity has fallen as stricter regulations raised tier 1 ratio requirements.
  • Return on equity for all the U.S. global systemically important banks (G-SIBs) has trailed the tier 1 capital ratio.
  • Many banks have retained profits or issued new shares to comply with the regulations instead of raising capital by debt.

Read corresponding blog entry.

Sources: Bloomberg, Milken Institute.

Are Higher Leverage Ratios Behind Banks’ Lower Return on Equity?

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