RWA/TA is defined as the ratio of risk-weighted assets to total assets (Berger, 2014)
 
The risk-weighted assets divided by total assets (RWA/TA) is widely used as a standard measure of risk in banking supervision and regulation (Basel Committee on Banking Supervision (2010)), and has also been used extensively in the empirical literature because it is perceived to be a true ex ante measure of portfolio risk (e.g., Avery and Berger (1991), Shrieves and Dahl (1992)). This ratio weights assets and off-balance sheet activities according to their perceived credit risk to allow inferences about the soundness of the bank, and consequently allows picking up the fact that certain executives may shift into asset and off-balance sheet categories with low or high-risk weights. We use this measure as our first dependent variable because, unlike other widely
used proxies of bank risk such as non-performing loans and loan loss provisions, our measure is more likely to reflect changes in portfolio risk of the bank without any time lags. In addition, since the sample consists primarily of small and medium-sized public and cooperative banks whose main risks arise from the balance sheet's asset side rather from the liability side, it is the best available approximation of the risks inherent in these types of institutions.