hard · Debt Capital Markets primary-issuance-syndication
Why is the 'Leverage Ratio' a critical constraint for bank dealers even when holding safe assets like government bonds?
- It prevents banks from participating in the 'Primary Dealer' system for Treasury auctions.
- It is a liquidity rule that requires banks to hold cash to cover 30 days of outflows.
- It is a non-risk-weighted backstop that requires capital against the absolute size of the balance sheet, regardless of asset safety.
- It mandates that banks hold a specific percentage of their assets in high-yield corporate bonds to diversify risk.
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