Banks Are Now as Leveraged as They Were Before the Great Recession, but Don't Panic
After the Great Recession, regulators beefed up a lot of the rules governing banks, their lending practices, and how much regulatory capital they need to hold to ensure the safety and soundness of the global financial system.
Given that it's now been several years since the implementation of all of this complex regulation, I was surprised to hear Tom Michaud, the chief executive officer of the investment bank Keefe, Bruyette & Woods, recently say on S&P Global's podcast Street Talk that many banks today are about as leveraged as they were in 2007 right before the Great Recession.
With inflation high, interest rates rising, and the economy in a fragile place right now, it might concern investors to hear such a statement. But while a highly leveraged banking system might sound worrisome, there's no need to panic just yet. Here's why.
Source Fool.com
