This was safe lending which fetched good returns and the banks made good profit out of it. Naturally, there was little incentive for them to do anything else except lend to the Government which was both risk free and highly remunerative. Secondly, the government owned most of the banks.
The leverage ratio, i.e., a minimum ratio between equity capital and non-weighted assets, was introduced as a backstop to risk-sensitive requirements. It is by definition a rough measure, as it is not calibrated to the riskiness of assets, and is not therefore expected to be binding on banks’ operations in most circumstances.