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Banks’ average risk weight (risk-weighted assets per unit of assets) has almost halved, falling from over 70% in 1993 to below 40% at end 2011 (see, also, Blundell-Wignall and Atkinson (2011)). There are three possible interpretations of this trend. One is that banks’ assets, in aggregate, are around half as risky today as they were 20 years ago. A second is that banks are twice as good at managing these risks as they were 20 years ago. In the light of the crisis, which unearthed huge risks on banks’ balance sheets accumulated over this period, neither proposition rings especially true. To see why, consider the evolution of an alternative measure of risk – simple bank leverage. In the pre-crisis boom, bank leverage rose steadily to reach historically unprecedented levels. This signalled high and rising bank risk (Chart 2). Indeed, bank leverage and bank risk weights moved in opposite directions over this period, with a correlation coefficient of minus 0.6. While the risk traffic lights were flashing bright red for leverage, for risk weights they were signalling ever-deeper green. 2  BIS central bankers’ speeches  The subsequent financial crisis has made clear which traffic light signal was at fault.1 The boom was leverage-fuelled and so too has been the subsequent bust. At least at an aggregate level, bank risk weights appear to have borne, at best, a tenuous relationship with risk. At worst, they were a contrarian indicator.