Leverage Ratio

The leverage ratio (LR) is a ratio of the bank's Tier 1 capital to its exposure measure as defined under the Banking (Capital) Rules.

According to the requirements of Basel III, authorized institutions (AIs) need to comply with not only the risk-based capital adequacy ratio, but also the non-risk-based LR requirement as a “back-stop” to restrict the build-up of excessive leverage in the banking sector.