The recent crisis was the result of a cascade of shocks that originated in the financial sector. It makes sense, therefore, to start by asking how the structure of the banking sector affected outcomes across countries. Deposits are thought to be a relatively stable source of bank funding; economies where banks have relatively low loan-to-deposit ratios before the beginning of the crisis may therefore be relatively robust. Similarly, better capitalised banks should be better able to absorb losses while maintaining the supply of funding to support the real economy. We measure the levels of regulatory capital ratios for the average.
