For example, our measurement has not caught up with the increased importance of stock options. Stock options are incorporated, based on gains upon exercising the options, in the productivity and cost measure, but not in the ECI.
First and foremost, it has the virtue of simplicity. Not only is it easy to calculate and easy for market participants and the public to understand, it also provides a single benchmark by which to easily compare and calibrate institutions’ capital positions. In addition, a leverage ratio provides a relatively straightforward gauge of how close an institution is to insolvency.