An important lesson of the crisis was thus to back up the rules based on risk-weighted assets with a simple and easily verified limit on leverage.The "leverage ratio"—the ratio of equity to assets—is certainly a crude measure.
"I don't regret anything about" the years with Mr. Jacobs, he added, and anyhow even as the ex-partner of a globally famous person, one can leverage a certain amount of equity for one's personal brand.
"The concept of leveraging sweat equity to create wealth was unknown in India then," says CEO Murthy, an engineer trained at the elite Indian Institute of Technology.
The leverage ratio sets the amount of equity that banks need as a proportion of their total balance-sheets; unlike the commonly used capital ratio, assets are not weighted to reflect their riskiness.
When funding with a mix of debt and equity, the lower the leverage, the lower the riskiness of equity per dollar invested, and therefore the lower the return investors require as compensation for bearing the equity risk.
With Mr. Meriwether and the two famous economists heading the investment team, it quickly raised $5 billion of equity, which they used as leverage to raise $95 billion in loans.
"For the first time we've put together a leadership campaign under a wonderful umbrella that leverages the equity of the strong brand name".
Then there are hedge funds using lots of leverage, private equity firms buying public companies, the new merger wave and all those share buybacks.
For every $1 of equity, the $22bn Carlyle Capital Corporation fund was leveraged with $32 of loans.
The agency said the deal with Northwest Investments involved a one-to-one leverage in which $1.386 billion of debt equaled the same amount of equity.
These are the market value of equity (MV), foreign listing status (LIST), financial leverage (LEV), or whether a firm is audited by a Big-Four company (BIG4).
