Erik R. Sirri is a former director in the division of trading and markets at SEC, having held the post at key critical phases of the credit crisis. He is now Professor of Finance at Babson College.
In testimony earlier this year to the US Congress Financial Crisis Inquiry Commission, Sirri made the following observation, worth bearing in mind for those who seek to reform the Basle standards, and prudential yardsticks for global banking regulation post-crisis:
'While the attraction of leverage tests is clear, their implementation is anything but, and can easily provide false comfort. For example two firms with identical 33 to 1 leverage ratios (assets to net worth) may have very different risk profiles. The degree of risk arising from leverage is dependent on the type of assets and liabilities making up the balance sheet.' (Sirri said this in his FCIC Testimony, May 5 2010).
In testimony earlier this year to the US Congress Financial Crisis Inquiry Commission, Sirri made the following observation, worth bearing in mind for those who seek to reform the Basle standards, and prudential yardsticks for global banking regulation post-crisis:
'While the attraction of leverage tests is clear, their implementation is anything but, and can easily provide false comfort. For example two firms with identical 33 to 1 leverage ratios (assets to net worth) may have very different risk profiles. The degree of risk arising from leverage is dependent on the type of assets and liabilities making up the balance sheet.' (Sirri said this in his FCIC Testimony, May 5 2010).