The term ‘excessive leverage’ means the same thing as too little capital or too much debt. A lack of bank capital was a major cause of the financial crisis, because under-capitalised financial institutions could not absorb losses and had to be bailed out.

| January 14, 2019


QUESTION  

The term ‘excessive leverage’ means the same thing as too little capital or too much debt. A lack of bank capital was a major cause of the financial crisis, because under-capitalised financial institutions could not absorb losses and had to be bailed out.   

Evaluate why financial institutions aspire to operate with less capital

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