Banking sector leverage

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This indicator presents the ratio between the financial assets of the banking sector and their equity, also known as the equity multiplier ratio. This can be used alongside other measurements of the financial leverage of this sector to ascertain its overall financial stability and to analyse its financial health. The indicator covers the banking sector (covering central banks, and Monetary financial institutions, S121 and S122_3, respectively, in the System of National Accounts terminology), as well as other financial intermediaries, except insurance corporations and pension funds (S123). Leverage is computed as the ratio of selected financial assets to total equity. The selected financial assets correspond to currency and deposits, debt securities and loans, as recorded on the asset side of the financial balance sheets of these financial sub-sectors. Total equity relates to shares and other equity, except mutual fund shares, as reported on the liability side of their financial balance sheet. Own funds, which are calculated as total net worth plus shares and other equity, would have been preferable as a denominator to avoid stock market fluctuations. However due to the non-availability of data on non-financial assets for many OECD countries, the total net worth could not be calculated. In this respect, shares and other equity, which form a part of own funds, are selected as a denominator. Data are under 2008 System of National Accounts (SNA 2008) for all countries except for Chile, Japan and Turkey (SNA 1993).

Banking sector leverage

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Banking sector leverage

This indicator presents the ratio between the financial assets of the banking sector and their equity, also known as the equity multiplier ratio. This can be used alongside other measurements of the financial leverage of this sector to ascertain its overall financial stability and to analyse its financial health. The indicator covers the banking sector (covering central banks, and Monetary financial institutions, S121 and S122_3, respectively, in the System of National Accounts terminology), as well as other financial intermediaries, except insurance corporations and pension funds (S123). Leverage is computed as the ratio of selected financial assets to total equity. The selected financial assets correspond to currency and deposits, debt securities and loans, as recorded on the asset side of the financial balance sheets of these financial sub-sectors. Total equity relates to shares and other equity, except mutual fund shares, as reported on the liability side of their financial balance sheet. Own funds, which are calculated as total net worth plus shares and other equity, would have been preferable as a denominator to avoid stock market fluctuations. However due to the non-availability of data on non-financial assets for many OECD countries, the total net worth could not be calculated. In this respect, shares and other equity, which form a part of own funds, are selected as a denominator. Data are under 2008 System of National Accounts (SNA 2008) for all countries except for Chile, Japan and Turkey (SNA 1993).

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