I think it is true. We all live a life beyond our means. I.e. I can borrow money to pay my mortgage for 30 years. This is something beyond my power. Who can guarantee that I will have job for the next 30 years? Who can guarantee that I will live for the next 30 years? We individuals live beyond our means, what about governments? Well, they do the same too. They heavily borrow, sometimes as much as their GDPs. That`s crazy! But they do. As a consequence a little out of the ordinary creates chain effect disasters. Can you imagine the dollars spent on the Ukranien war while Mali is starving for hunger and clean water? Is it logical? Not at all. But this is how we humans treat ourselves in life.

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But why do bank loans care about whether the value of the collateral is sufficient? Not being concerned about the lender's leverage ratio?

Yes, they care not only the value of the collateral exceeds the loan value but also the liquidity of the borrower. If customer default on their loan, the collateral will take time to liquidate. That means no cash flow for the bank. My experience tells me that banks do care about the liquidity of their customers.

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Since the collateral is more valuable than the value of the loan, the bank does not care about the lender's leverage ratio, but only cares about a simple formula: Whether the outflow of currency (or loan) is equal to or less than the inflow currency, and the inflow is the value of the collateral auction. Of course, the lender's collateral is not immediately auctioned off, but someone else's deposits will flow into the bank to compensate for this "outflow" of the loan. In other words, banks are only concerned about whether the outflows and inflows of their own accounts are balanced, indicating that there is a very simple formula for finance: Mg + Mc> Mx, where Mx refers to the currency flowing out the bank, Mg refers to the currency flowing into the bank, and Mc refers to the currency originally owned by the bank. That is, "the balance between income and expenditure", and "not making ends meet" is the cause of the financial crisis. The reason is so simple that banks only need to investigate the income of the payer's income and predict whether he is able to repay the loan in the future.

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But does this formula seem too simple? It simply feels like nonsense, because everyone knows this truth, but some banks do not do so strictly, but risk lending money to people who have no ability to repay the loan. In 2008, for example, the Bank of America lent the money to a little dog, and the bank did not actually investigate the lender's income. Like the main characters in the movie The Big Short, they predicted the financial crisis precisely because they investigated the income of the lenders.

Banking is a very sensitive business. They are exposed to maturity risk, interest rate risk, currency risk, loan default risk etc. On top of that there is also securitization and interbank borrowings. So, if something goes wrong in the chain a series of banks are affected. Banks should be managed by strict rules. There must be strict government scrutiny otherwise public will be harmed. Even local banks create risks. The recent 2 us banks bankruptcies is a proof of that. It is a sensitive business.