A Roadblock to Brawny Bank Reform

...

To compute a leverage ratio, a bank would divide its tangible common equity, a measure of a company's readily accessible capital, by its total assets. Under the proposed rule, the nation's largest federally insured banks would have to show leverage ratios of at least 6 percent, double the 3 percent required under international capital standards currently set by the Basel Committee on Banking Supervision.

...

One of the ratio's primary benefits is that it is much harder to manipulate than other methods used to calculate capital requirements, like those based on risks associated with a particular type of asset. Before the credit crisis, for example, mortgage securities were considered relatively low-risk assets and didn't require large amounts of capital to be set aside in case of losses. We saw what happened with that.

Another plus to the proposed ratio is that it would include large bank holdings that are currently excluded from required capital calculations. These include trillions of dollars in derivatives positions held by the banks as well as assets carried by related entities that do not show up on the institution's balance sheet. By holding capital against these positions, the risks they pose to the banks would be reduced.