The leverage ratio of a commercial bank refers to the ratio between the net Tier 1 capital it holds and the adjusted balance of assets on and off the balance sheet. Tier 1 capital includes shareholders' equity and other core liabilities. After adjustment, all kinds of risk weights and offsets are considered for assets inside and outside the balance sheet. By setting appropriate and specific requirements by regulators, commercial banks are restricted from expanding their debt scale, increasing their risk exposure, and encouraged to maintain a sufficiently stable and reliable reserve level. Doing so can effectively control systemic risks, prevent the financial crisis from seriously impacting the entire financial system, and maintain the stable operation of the financial market.