Likewise, here in the United States, banks piled into mortgage lending in the early- to mid-2000s not only because it offered generous returns, but also because regulatory capital requirements did not adequately capture the risks in this lending, particularly for subprime exposures.
Leverage ratio One of the ways that supervisors, particularly here in the United States, have addressed shortcomings in the risk-based capital regime has been to also impose a simple capital-toassets requirement, or leverage ratio, to supplement the risk-based measures. A leverage ratio has a number of things that make it intuitively appealing, if it can be set correctly.