Equity to assets ratio of banks in the U.S. 2000-2019
In 2019, the equity to assets ratio of banks in the United States rose to 11.39 percent, the highest since at least the year 2000. This is the ratio of shareholder equity divided by that bank’s total assets. It indicates what percent of the company is owned by the investors.
Banks and assets
Many bank assets are investments, such as consumer loans. To increase their chances of profiting, the banks have incentive to increase these assets. However, this also exposes the banks to risk, such as defaults and non-performing loans. For this reason, analysts and regulators pay attention to measures such as this to be sure banks are not over-leveraged.
Basel III
Basel III is an international agreement, signed in Basel, Switzerland, regarding banking reforms after the Financial Crisis. One of the major indicators that regulators focused on was tier 1 capital ratios. Similar to the equity to assets ratio, it is considered a good estimate for the bank’s robustness and stability.
Banks and assets
Many bank assets are investments, such as consumer loans. To increase their chances of profiting, the banks have incentive to increase these assets. However, this also exposes the banks to risk, such as defaults and non-performing loans. For this reason, analysts and regulators pay attention to measures such as this to be sure banks are not over-leveraged.
Basel III
Basel III is an international agreement, signed in Basel, Switzerland, regarding banking reforms after the Financial Crisis. One of the major indicators that regulators focused on was tier 1 capital ratios. Similar to the equity to assets ratio, it is considered a good estimate for the bank’s robustness and stability.
