Leverage and Procyclicality: An Application on Banking Sector

The purpose of this study is to investigate the procyclicality of the leverage structure of the banks operated in banking sector in the term of 2006 January-2018 January. In order to determine the procyclicality, the relationship between the changes of leverage rate and asset was investigated by regression analysis. The estimations of the regression analysis indicate that the asset change affects the leverage rate change positive direction and statisticallly significant. This result shows that the leverage is procyclical. Leverage procylicality can cause increase in the leverage rate and trigger of the financial cycles and the credit cycles each other during periods when the banks assets grow. In this way, it can be said that by taking approach the leverage as a financial accelerator mechanism, with determined countercyclical policy during financial expansion periods, the precautions can be developed that can decrease macro risks.