Bank capital leverage: A scholarly literature review

Abstract

This paper reviews previous academic studies on the "leverage ratio framework" under the Basel 3 framework. It focuses on the past two decades, especially on the effect of Basel 2 and 3 adoptions. This review chooses peer-reviewed journals and expert systems as the key sources for collection. The review is categorized by taking the aims of the authors that solve the problems in the denominator of the leverage ratio formula of the Basel 3, and each topic is discussed in chronological order. From the regulation perspective, reviewed sources propose new techniques and methods to manage risks related to the bank leverage topic. Suggestions related to the stricter leverage rules and improved disclosure systems were identified as the most important.