Thank you

I agree that book value based leverage ratios are a bit screwy, particularly if both the numerator and denominator reflect fantasies. To that end, I rather liked the graph you posted a few days ago depicting leverage as a VaR-to-Equity ratio. I’m curious: were the equity values underlying that graph reflective book or market, do you know? They look like they must be book, absent a giant spike on the right-hand side.

JCK, your point is well taken that GAAP/IFRS divergences lead to stating higher assets under IFRS than under US GAAP. Walker acknowledges this fact, but questions the degree. At that point, I wish you had both given up the argument. This being a blog and not an academic journal, it was unreasonable for Walker to demand that you produce robust evidence for your claim. You graciously produced anecdotal evidence, which was illustrative but not compelling. Walker remained unconvinced; but rather than calmly stating so and leaving it at that, he attacked your anonymity and called you names. By the same token, your tone was a bit too harsh for my taste, and in your rush to disparage the unwelcome commenter, you disregarded a reasonable objection: that after adjusting for differences in accounting, DB’s leverage ratio (BV(A)/BV(E)) is 2.5x that of BAC [prior to adjusting for accounting, it is 6.3x]. The point is ultimately moot however, as arguing over a particular entity’s leverage ratio isn’t terribly enlightening.

FWIW, are you ignoring any material GAAP/IFRS differences with respect to the accounting for equity? That is, you focus on the numerator, but what of the denominator?