Complexity is part of the story, but it is largely a consequence of higher leverage of individual institutions. Mitigating complexity is mostly about taming this leverage. The motto is: if you take care of leverage in the small, complexity will take care of itself.
Leverage in the small and in the large
By: Hyun Song Shin – BIS
Off-balance sheet leverage
Singh and Alam argue that existing databases are not capturing sizeable off-balance sheet transactions. As a result, measures of leverage are inaccurate and do not reflect the complexity of the financial system.
Leverage—A Broader View
Authors: Manmohan Singh and Zohair Alam
From: IMF
Leverage and the business cycle
Jensen and al. find that financial leverage can explain the asymmetry between the deep contraction caused by the financial crisis of 2008 and the slow recovery ever since.
Leverage and deepening business cycle skewness
Authors: Henrik Jensen, Ivan Petrella, Søren Hove Ravn and Emiliano Santoro
From: Banco de España
