Source
Source Contact person/organisation Contact person/organisationIn this dataset, almost all OECD countries compile their data according to 2008 System of National Account (SNA).
The link to the file "ANA_changes.xls" is available for users to provide more information on where OECD countries and non member countries stand regarding the change over the 2008 SNA.
The readers' guide gives general information on the dataset and withheld criteria for this dataset.
Data Characteristics Data Characteristics Other data characteristics Other data characteristicsThe ratio between the financial assets of the banking sector and their equity, also known as the equity multiplier ratio, can be used alongside other measurements of the financial leverage of this sector to ascertain its overall financial stability and to analyse its financial health.
Banks engage in this kind of leverage, with the aim of increasing their return on equity. But a higher equity multiplier indicates a higher financial leverage, which is a potential source of financial fragility as it may increase a financial institution's exposure to risk and cyclical downturns and may mean that the sector is relying more on debt to finance its assets.
However, a high ratio does not necessarily mean that the company is intended to fail; it only indicates that this scenario is more likely to occur for a company that has high financial leverage. Some companies may wisely use financial leverage to fund assets, which, in the long run, can allow the company to get out of its debt.
Concepts & Classifications Concepts & Classifications Key statistical concept Key statistical conceptDefinition
The banking leverage indicator refers to the banking sector (monetary financial institutions (S121_2_3) and other financial institutions, excluding insurance corporations and pension funds (S125). Leverage is computed as the ratio of selected financial assets to total equity:
- the selected financial assets correspond to currency and deposits, debt securities and loans, as recorded on the asset side of the financial balance sheets of these financial sub-sectors;
- total equity comprises listed and unlisted shares and other equity, as reported on the liability side of their financial balance sheet. Own funds, which are calculated as total net worth plus equity, would have been preferable as a denominator to avoid stock market fluctuations. However due to the non-availability of data on non-financial assets for many OECD countries, the total net worth could not be calculated. In this respect equity, which forms a part of own funds, is selected as a denominator.
Other manipulations Other manipulations Other Aspects Other Aspects Recommended uses and limitations Recommended uses and limitationsComparability
Data are non-consolidated for all OECD countries, except for Australia and Israel.
The financial sector on which this ratio is calculated can differ according to countries. In particular, the other financial intermediaries, except insurance corporations and pension funds sub-sector (S125) can include financial auxiliaries (S126) in some countries, such as Canada for instance. Also in some EU countries data for the sector S125 are not available separately and are included in the aggregated sector other financial institutions excluding non-money market funds investment funds (S125_6_7).
In this dataset, almost all OECD countries compile their data according to 2008 System of National Account (SNA).
The link to the file "ANA_changes.xls" is available for users to provide more information on where OECD countries and non member countries stand regarding the change over the 2008 SNA.
The readers' guide gives general information on the dataset and withheld criteria for this dataset.
The ratio between the financial assets of the banking sector and their equity, also known as the equity multiplier ratio, can be used alongside other measurements of the financial leverage of this sector to ascertain its overall financial stability and to analyse its financial health.
Banks engage in this kind of leverage, with the aim of increasing their return on equity. But a higher equity multiplier indicates a higher financial leverage, which is a potential source of financial fragility as it may increase a financial institution's exposure to risk and cyclical downturns and may mean that the sector is relying more on debt to finance its assets.
However, a high ratio does not necessarily mean that the company is intended to fail; it only indicates that this scenario is more likely to occur for a company that has high financial leverage. Some companies may wisely use financial leverage to fund assets, which, in the long run, can allow the company to get out of its debt.
Definition
The banking leverage indicator refers to the banking sector (monetary financial institutions (S121_2_3) and other financial institutions, excluding insurance corporations and pension funds (S125). Leverage is computed as the ratio of selected financial assets to total equity:
- the selected financial assets correspond to currency and deposits, debt securities and loans, as recorded on the asset side of the financial balance sheets of these financial sub-sectors;
- total equity comprises listed and unlisted shares and other equity, as reported on the liability side of their financial balance sheet. Own funds, which are calculated as total net worth plus equity, would have been preferable as a denominator to avoid stock market fluctuations. However due to the non-availability of data on non-financial assets for many OECD countries, the total net worth could not be calculated. In this respect equity, which forms a part of own funds, is selected as a denominator.
Comparability
Data are non-consolidated for all OECD countries, except for Australia and Israel.
The financial sector on which this ratio is calculated can differ according to countries. In particular, the other financial intermediaries, except insurance corporations and pension funds sub-sector (S125) can include financial auxiliaries (S126) in some countries, such as Canada for instance. Also in some EU countries data for the sector S125 are not available separately and are included in the aggregated sector other financial institutions excluding non-money market funds investment funds (S125_6_7).