the term equity represent the bank's capital . The return on equity can be broken down as follows.
Roe = Roa * Leverage measure
the ratio assets/equity is sometimes called the leverage measure, be cause leverage reflects the volume 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