Banks’ leverage needs limits

MUCH stricter system-wide limits on banks’ leverage are needed, the Bank of England’s executive director for financial stability Andrew Haldane said yesterday.

“These ratios will need to be state-dependent, rising as the temperature rises across the financial system as a whole.”

Haldane stressed there is a need for more focus on returns on assets rather than on equity, which can be magnified by leverage. 

Returns need to be more accurately risk-adjusted if the right risk-return balance is to be struck, he said.