It may sound facetious, given banks' equity-raising this year, but do capital ratios actually matter? In theory, they measure the buffer banks have to absorb losses. The specific measure in vogue now, equity Tier 1, takes book tangible common equity - minus goodwill and other intangibles - and compares it with book assets, weighted for their risk. Most European banks are targeting a ratio of 6 per cent or more, pushed on by their regulators.

Only diehard traditionalists argue that book values are the best gauge of an industrial company's capacity to absorb losses. Cash flows relative to fixed charges such as net interest costs are preferred, ideally after adjusting for the profit cycle. That the S&P 500 trades at 2.7 times book value suggests balance sheets are a poor guide to assets' break-up value. It is entirely possible to have negative tangible equity and be in rude health. AT&T, America's third largest company by market capitalisation, is a case in point. No one is suggesting it needs an emergency rights issue.