Again, crucially, this capital was predominantly made up of tangible common equity. During the panic, investors understandably lost faith in Basel risk weights. Gallingly, on the day before each went under, every bank that failed (or was saved by the state) reported capital that exceeded the Basel II standard by a wide margin.
By the autumn of 2008, investors had already seen far too many major institutions hobbled by losses on purportedly risk-free securities such as leveraged super senior tranches of securitizations. Many turned instead to simple leverage ratios to assess capital adequacy. Canadian banks were already subject to such a stringent test.