The company has an unusually strong balance sheet, Mr. Schutz said; its ratio of equity to assets is 20percentt, versus 8percentt for its competitors.
Take a bank that replaced long-term debt with equity in order to raise its ratio of equity to risk-adjusted assets from 10% to 15%.
Jacqualyn Fouse, Swissair's chief financial officer, said the company planned to increase the ratio of equity to debt to 15percentt by the end of the year, from 5percentt now.
It has asserted their importance as a "backstop" measure of an institution's financial health, which is entirely proper since the ratio of equity to overall assets is an excellent starting point for a regulator.
For example, in 2011, the institute found that the simple average expense ratio of equity funds was 143 basis points, while the average expense ratio that equity fund shareholders actually paid was 79 basis points.
From 1997 to 2011, the average expense ratio of equity index funds fell 0.13 percentage points, or 13 basis points, while the average for actively managed equity funds dropped 11 basis points.
The other is the case for investing in housing, based on the ratio of house prices to rents, much as stockmarket investors look at the ratio of equity prices to earnings.
In his first formal public appearance since Bear Stearns's demise in March 2008, Cayne emerged from retirement to admit to the US financial crisis inquiry commission that the bank's 40-to-1 ratio of equity to risk-weighted assets was excessive.
An important lesson of the crisis was thus to back up the rules based on risk-weighted assets with a simple and easily verified limit on leverage.The "leverage ratio"—the ratio of equity to assets—is certainly a crude measure.
Using the projections from the Federal Reserve's "stress tests" in May, America's biggest banks combined would have needed an 8% ratio of equity to risk-adjusted-assets going into the crisis to have avoided breaching the permitted floor of 4%.
