However, this is even more critical in the case of financial institutions due to the fact that they take deposits from the public, their ability to create money through the granting of credit, and because they manage payment systems. For this reason, authorities have always sought to avoid situations where a bank is unable to meet its commitments due to insufficient equity to absorb potential losses. It is true that, as has been proven on numerous occasions, insolvency or technical bankruptcy was not the immediate cause of the collapse of institutions. But, when attempting to objectively assess the health of any of them, it is logical that regulators would focus on the level of available equity, as it serves as a defensive barrier for the institution’s creditors. Furthermore, they have done so by resorting to basically similar mechanisms, specifically some type of minimum ratio between equity and acquired assets.
