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But analysts reckon the first stage of the plan, involving an investment of £25 billion, could increase their core Tier-1 capital ratios, the equity and reserves that are the purists' measure of a bank's cushion against unexpected losses, by up to two percentage points, to more than 7%.
(The ratio compares equity and reserves, minus nonperforming loans, to assets).
The ratio should be built around common equity and reserves, with a certain proportion of preferreds and we should completely scrap this whole tier-one calculation because it's, again, not achieving the result that people claim they want.
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"Our starting point is that Barclays has £36bn of committed equity capital and reserves; we are well funded, and we are profitable.
There are fewer footnotes and more assertions, including points that are plainly wrong (for instance the bizarre idea that "too much common equity and cash reserves" caused persistent deflation at the end of the 19th century (see the last paragraph on Page 12).
We wrote a book with an entire chapter on Wells Fargo and an entire chapter on American Express, which are two good examples of companies that we think are going to face hideous losses and do not currently have enough equity and loss reserves on the their balance sheet to cover all of the losses, which is why many people are short those stocks.
This is a bank's core reserve capital, comprising equity, disclosed reserves and retained earnings.
This is a bank's core capital, which is made up of equity, accumulated reserves and earnings that have not been paid out as dividends.
Wells' tier one common capital, a subset of tier one capital that includes common equity but excludes preferred stock and reserves, was 5.2% of risk assets at the end of September.
If one calculates what is called the banks' "capital ratio," which is done by adding the banks' reserves and common equity and then dividing by the assets, it appears that the banking system has more capital than at any time since 1934.
But in fact, 77percentt of the world's oil reserves are held by national oil companies with no private equity, and there are 13 state-owned oil companies with more reserves than ExxonMobil, the largest multinational oil company.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com