Capital and liquidity ratio deck
Recall the purpose of common capital and liquidity metrics and avoid overinterpreting them.
What does a risk-based capital ratio ask? How much qualifying capital supports risk-weighted assets. It connects loss buffer to risk, but it depends on risk weights and does not answer immediate liquidity. Capital Capital ratio versus liquidity coverage: what is the difference? A bank can have one problem without immediately having the other. Stakeholder says: "The ratio is green, so there is nothing to discuss." Green ratio means no issue. Management wants to close a risk discussion early. Your line Green is useful. Let's also name the largest assumption behind it and the risk the ratio does not measure. Treating…
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