In summary, what we support is a regime in which banks face incentives to hold sufficient capital to ensure the probability of failure is reduced because bank management and shareholders are aware that imprudence by them will mean at-risk depositors might run.
However, the practice of measuring the leverage ratio solely by on-balance-sheet items – as happens in some jurisdictions – also creates incentives to establish off-balance sheet special purpose vehicles. IV  In order to avoid getting mired in detail, we need to keep our eyes on the big picture in terms of the effects of the many proposals for new rules.