the term equity represent the bank's capital . The return on eqquity can be broken down as follows.
Roe = Roa * Leverage measure
the ratio assets/equity is sometimes called the leverage measuer, be cause leverage reflects the volum of assets a firm supports with equity. the greater the leverage measure. the greater the amount of assets per dollar's worth of equity. the above breakdown of ROE is useful because it can demonstrate how excessive capital can Lower a bank's ROE