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##s as well as the revision of accounting standards, are of paramount importance. furthermore, the introduction of a non - risk based leverage ratio will also contribute to putting an ultimate brake on the system. second, the financial crisis clearly showed the lack of loss absorption capacity of many regulatory capital elements, namely of the so - called hybrids. in some important institutions common equity was as low as 2 % of total risk weighted assets in the run - up to the crisis. there was a clear need to implement new standards demanding more and better quality capital to strengthen the loss absorbing capacity of the financial system. the basel committee on banking supervision ( bcbs ) has already agreed on a new global capital standard, endorsed also by g20 leaders in november 2010, the potential implications of which i ’ ll discuss in more detail later. bis central bankers ’ speeches third, the financial system was too vulnerable to market and funding liquidity shocks. the introduction of regulation on liquidity ratios, imposing more robust buffers in the short term and less structural dependence on unstable wholesale funding, is an important step towards enhancing the resilience of the system. fourth, the elimination or significant mitigation of the “ too big to fail ” problem represents a major challenge for regulators. a number of initiatives are currently being discussed at the international level under the aegis of the financial stability board ( fsb ). fifth, the prevention of systemic risk coming from the “ shadow banking sector ” remains one of the most important issues of the current regulatory agenda. this can be achieved both directly by enlarging the perimeter of regulated institutions as well as reinforcing accounting rules on consolidation and indirectly by regulating the flows of credit or liquidity backstops coming from the regulated sector. sixth, tightening the regulation of over - the - counter derivatives through the use of central counterparties ( ccp ’ s ) and trade repositories as well as by moving trade of standardized instruments ( e. g. cds ’ s ) to organized exchanges are key elements of enhancing transparency and mitigating counterparty credit risk in these markets. seventh, correction of the prevailing adverse incentives created by an excessively short - term perspective of risk measurement and performance assessment. the introduction of new governance principles regarding risk management and compensation guidelines should help to align incentives with long - term sustainability. finally, improving the oversight of credit rating agencies ( cra ’ s ) and reducing the reliance on external ratings for official regulatory purposes. cras have contributed to the procycl