Capital and liquidity buffers in some ways are very similar. They are both balance sheet items designed to increase the resilience of the bank in the face of economic shocks. However, capital and liquidity buffers perform two very different roles. During poor economic times such as a recession, the value of the assets in a bank decrease either due to defaults on loans or a reduction in the market value of financial securities owned by the bank. As a balance sheet always needs to balance the equity capital held by a bank acts as a buffer to protect depositors, meaning that as the bank's assets reduce in value, this can all be absorbed by the equity capital of a bank reducing in value. Allowing the bank to still have enough remaining assets to cover all of its liabilities. In other words, the capital buffer allows for the financing side of a bank's balance sheet to shrink without impacting depositors when the asset side of the balance sheet decreases in value. However, there is another outcome which might result in bankruptcy risk for a bank. If depositors were to undertake a sudden large withdrawal of deposits or debt investors in a bank were unwilling to refinance debts due for repayments. The liquidity buffer acts as a way for a bank to meet its obligations without impacting other usually longer term assets, such as loans that it relies upon to generate a return. Holding a sufficient amount of readily liquid assets in a liquidity buffer allows banks to be able to shrink the assets side of their balance sheets using their liquid assets in their liquidity buffer to meet obligations on the liability side of the balance sheets without impacting other assets.