Excessive leverage refers to a situation where a financial institution or individual has taken on too much debt relative to their assets or income. This can be problematic because it increases the risk of default, as the borrower may be unable to make the required debt payments if their income or asset value declines. High levels of leverage can also amplify losses in the event of market downturns, as the borrower may need to sell assets at a loss in order to meet their debt obligations. Excessive leverage can be caused by a variety of factors, including reckless borrowing, over-optimistic assumptions about future income or asset values, and a lack of understanding of the risks involved. It is generally considered to be a risky financial practice, and regulators often impose limits on the amount of leverage that financial institutions can take on in order to mitigate the risks of financial instability.