Global leverage may be higher than supervisors realise – IMF paper
Standard measures of leverage are too focused on balance sheets, researchers say
Failure to account for off-balance sheet items can lead to “substantial underestimation” of banks’ leverage, researchers from the International Monetary Fund argue in a new paper.
Manmohan Singh and Zohair Alam say standard approaches to measuring leverage have relied too much on bank balance sheets, failing to capture fully the “bank-non-bank nexus”. According to their estimates, leverage among globally systemic banks may be as much as a third higher than standard measures imply.
In Leverage
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