Moreover, the agreement provides a definition of common equity that will prevent firms or national regulators from including in the calculation of common equity certain assets that could dilute its lossabsorbing character.
Second, the minimum common equity ratio will be set at 4.5% of risk-weighted assets, with an additional requirement for a 2.5% “conservation buffer.” The minimum ratio should be understood as defining the amount of common equity needed for a firm to be regarded as a viable financial intermediary.