1 This, combined with critical reforms to money market funds and other vital short-term funding markets, have reduced the vulnerabilities in the financial system associated with liquidity mismatch and maturity transformation. In terms of capital, the quality of capital has improved with a particular focus on common equity, the most loss-absorbing form of capital.
The quantity of capital also has increased through higher minimum requirements and new capital conservation buffers that require banking firms to keep their capital levels well above the minimums in order to maintain full flexibility to allocate profits to capital distributions and employee bonus payments.