Sufficient capital buffers are crucial – and for large international banks they will have to increase further with the recently adopted requirements for bail-in-capital (TLAC) – but so is regulatory certainty, which is why I am in favour of bringing Basel III into full effect next year rather than conveying the impression that regulators are already working on a possible Basel IV.
Equity is costly, which is why exceedingly high capital requirements might unduly curtail bank lending. But equity is costly partly because of the preferential tax treatment of debt, which is why I am in favour of doing away with it. Furthermore, the recent credit developments do not suggest that the new capital requirements constrict lending on a lasting basis.