Original Answer
There is another way to analyze leverage in the bank sector. This is the amount of bank credit supported by a given level of bank reserves in the monetary base.
In the book Stabilizing an Unstable Economy, by Hyman Minsky, there is a chart of the ratio of total bank reserves to total bank credit. The FRED chart for bank credit (Billions):
https://fred.stlouisfed.org/series/TOTBKCR
The FRED chart for total bank reserves (Billions):
https://fred.stlouisfed.org/series/TOTRESNS
One can use the FRED tools to plot the ratio TOTRESNS/TOTBKCR. This plot will decline substantially prior to the 2008 financial crisis showing that banks expanded bank credit on a relatively small stable pool of bank reserves. However when the financial crisis develops in late 2008 the Federal Reserve is forced to provide large quantities of reserves to the aggregate bank sector under the implementation of monetary policy called Large Scale Asset Purchases (LSAP).
When the bank sector is forced to deleverage by saturated credit markets and unstable money markets the central bank is forced to replace some of the private market leverage with public financial instruments. Otherwise the "real" economy would be seriously disrupted by disruptions in the private credit and money markets.
Banking on Leverage
I am unable to find a clean source of leverage statistics kept by the FDIC. The FDIC may have better data than FED in this area.
So per the comment on my original answer the ratio of bank reserves to total bank credit is a liquidity ratio and not strictly a measure of leverage.
https://www.bis.org/speeches/sp140226.htm
Banking is all about leverage. Put simply, banks are highly leveraged institutions that are in the business
of facilitating leverage for others.
Leverage – or, as it is sometimes called, gearing – is a fairly basic concept in finance. In simple
terms, it is the extent to which a business funds its assets with borrowings rather than equity. More debt
relative to each dollar of equity means a higher level of leverage.
Banks, in modern banking systems, use central bank reserves to clear interbank payments on the bank payment tier of the payment clearing system.
Nonbanks, in modern banking systems, use bank liabilities, in the form of transaction deposits, to clear payment on the nonbank tier of the payment clearing system.
So technically the leverage in the bank or bank sector is given by the ratio of of debt to equity used to hold the bank assets. The ability to expand bank credit on a small relatively constant pool of bank reserves would be evidence that banks can expand leverage on the debt and equity side of the balance sheet without requiring the central bank to provide more net reserves in the aggregate bank.
Banks were considered well capitalized prior to the financial crisis in late 2008. But the banks were creating their own capital by issuing net new loans, issuing net new deposits, and converting those deposits to net new equity claims as necessary to comply with capital adequacy regulations. The bank sector had more adjusted equity due to collecting fee income for originating loans for distribution to nonbanks. This adjusted equity, however, was not sufficient to absorb the bad loan expense for the poor underwriting standards when the financial crisis manifested. The bank sector had off balance sheet liabilities tied to the bad loans in the nonbank sector which were not recognized as high risk under the scheme of regulation. The lesson is that bank leverage is a complicated outcome based on the analysis of market forces and regulations in a political-economic context. The textbook models of these interactions do not capture the complexity of actual systems.
Prices and Quantities in the Monetary Policy
Transmission Mechanism
However, there is a sense in which the focus on balance-sheet
quantities is appropriate. The mechanism that has amplified fluctuations in capital market conditions is the fluctuations in leverage and the associated changes in haircuts in collateralized credit markets. As the uncertainty of the future of mortgage-backed securities (MBS) increased in 2007, haircuts on MBS and ABS increased, forcing institutions to either unwind or move assets from off-balance-sheet vehicles onto bank balance sheets. This shifted funding of long-term assets from collateralized asset-backed commercial paper (ABCP) and repo markets into the uncollateralized money markets, with the effect of massively increasing money market spreads, such as the LIBOR-Treasury spread.
Financial intermediaries tend to hold long-term assets, financed
by short-term collateralized liabilities. In order to obtain funds,
intermediaries lend out assets they already own and receive cash,
which in turn can be invested in additional assets. The constraint
on how much of such collateralized lending can be done is imposed
by the level of haircuts. Haircuts can be thought of as the percentage downpayment an intermediary has to make in order to finance an asset. When a haircut is 20 percent, the intermediary can take out a maximum leverage of 1/20% = 5. When haircuts increase from 20 percent to 50 percent, the intermediary has to unwind to 1/50% = 2
times leverage. In this way, haircuts determine the amount of leverage that investors can obtain in repo markets. The haircut is the overcollateralization of a specific type of collateralized borrowing agreement such as the repurchase agreement (or repo) or other forms of collateralized borrowing such as agreements of the DTC.
