Concerns about capital adequacy for banks outside Canada were made worse by uncertainties caused by accounting standards, valuation methodologies, and a loss of credibility of the Basel II regulatory capital standard. It was not lost on investors that every single financial institution that failed had a capital ratio well above its Basel II regulatory minimum the day before it went down.
As a consequence, investors have demanded ever-higher capital ratios from all banks, creating a dynamic that has exacerbated the recession.