Bank's Balance Sheet
Assets Liabilities and Owners' Equity
Reserves $200 Deposits $2,000
Loans $1,000 Debt $150
Securities $800 Capital (owners' equity) -$150
Suppose a new customer adds $100 to his account at Upper Midwest National Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and the account.
This would also bring the leverage ratio from its initial value of to a new value of .