As a complement to the risk-based capital framework, a simple, but effective, leverage ratio was therefore imported from Canada into the global standard. This leverage ratio sets a cap on the value of the assets a bank can hold for each dollar of equity. It protects the system from risks that we might think are low but in fact are not.
We are big fans of a leverage limit here in Canada. We had one going into the crisis, and it served us well. But as the leverage ratio is finalized by the Basel Committee on Banking Supervision over the course of next year, it will be important to get its calibration right.