As a longtime banking journalist I probably shouldn't admit this, but until a few months ago I'd barely ever heard the term "tangible common equity." When evaluating the health of a bank, my colleagues and I had always been encouraged by analysts and investors to look at the measures about which regulators care most, such as total risk-based capital and Tier 1 risk-based capital ratios.

Now, though, many in the investment community are saying that the tangible-common-equity-to-total-assets ratio is actually the truest measure of a bank's health because - and this is them talking - it shows just how strong a bank's first line of defense is, without any muddling from such intangibles as goodwill, servicing rights and deferred tax assets. The higher the TCE/TA ratio, the less the banks would have to dig into regulatory capital to cover defaults.

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