Resilience should be assessed against the ability of the financial system to deal with unexpected events The resilience of a financial system has two key components – buffers against risks and the risks themselves. Notwithstanding difficulties with the definition of capital and liquidity buffers, these can be measured with a reasonable degree of certainty. On average, banks’ capital ratios have increased since the crisis.
Within the euro area, the Tier 1 capital ratio, which is measured in relation to banks’ risk-weighted assets, increased from 8.8% in the year 2008 to 14.7% in 2016 (CGFS 2018).4 This raise has been achieved by a decline in total assets, a decrease in average risk-weights, and by a strengthening of banks’ capital positions.