Which statement is true about banks?

The statement regarding banks being highly leveraged is accurate. Banks typically operate on a business model that involves borrowing a significant portion of their funds to lend to individuals and businesses. This leverage allows them to amplify their potential returns, as they earn interest on the loans they issue while paying lower interest on the funds they have borrowed. This practice is fundamental to how banks operate, as their ability to multiply their financial capital through leverage is a key component of their profitability.

In the context of banking regulation, banks are subject to various requirements that govern their capital ratios and leverage limits. Regulatory frameworks require banks to maintain certain levels of capital to ensure they can absorb losses and remain solvent. This means that while they are indeed leveraged, there are limits placed on this leverage to uphold financial stability.

The other choices contain inaccuracies about banking operations. Banks are not always profitable, as financial conditions, economic cycles, and mismanagement can lead to losses. Although regulated, the extent of regulation can vary across different jurisdictions and types of banks, so it's not accurate to state they are all highly regulated without qualification. Lastly, while banks do provide loans to individuals and businesses, they do not predominantly focus only on small loans; they also engage in large-scale lending and complex financial products.