Leverage Ratio: An empirical study of the European banking system

TL;DR

This study empirically examines how the European banking system's leverage ratio responds to adverse financial scenarios and explores its correlation with other financial variables using various regression methods.

Contribution

It provides an empirical analysis of leverage ratio behavior under stress and evaluates regression techniques for explaining its correlations with financial variables.

Findings

Leverage ratio decreases during adverse scenarios

Strong correlation between leverage ratio and certain financial variables

Regression models effectively explain leverage ratio variations

Abstract

This paper empirically analyzes a dataset published by the European Banking Authority. Our main aim was to study how the Leverage Ratio is affected by adverse financial scenarios. This was be followed by observing how Leverage Ratio exposures are correlated to various other financial variables and how various regression techniques can be used to explain the correlation.