Another factor might be the assumption of an evergrowing economy in which loans have been extended based on the value of real estate collateral rather than the stringent evaluation of firms themselves and the project under consideration. Some say that corporate bonds and CP are sometimes regarded as another form of loans.
Higher capital requirements will increase banks’ resilience but may add little to the cost of loans. In an environment of exuberant expectations of house price appreciation, such measures may therefore do little to restrain excessive credit demand.