12  BIS Review 50/2010  It is also fairly certain that capital requirements are an efficient, albeit crude, tool to ensure the stability of the banking system. Traditionally, capital requirements tend to alleviate moral hazard problems in the banking sector in the presence of deposit insurance, and allow banks to form a “cushion” against losses for depositors.
* * * I am very glad to welcome everyone here to this conference sponsored by the Federal Reserve System and the Conference of State Bank Supervisors.