For example, a bank has assets worth IDR 100 billion and equity of IDR 10 billion. This

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Question:

For example, a bank has assets worth IDR 100 billion and equity of IDR 10 billion. This bank's leverage ratio is 10. If the value of the bank's assets falls 5% to IDR 95 billion, the bank's equity will fall to IDR 5 billion. In this case, a 5% loss in assets causes a 50% decrease in equity (IDR 5 billion / IDR 10 billion). How do you think excessive use of leverage can affect the stability of the financial system