How might banks looking to fulfil the capital ratios set by supervisors or expected by markets respond to this scenario? Banks might respond by increasing their capital internally. That is, they would retain profits and pay out less to shareholders. But this particular avenue would be blocked off, especially if the economic slump eroded banks’ profits or even causes losses.
2  BIS central bankers’ speeches  Housing markets – which I will discuss in more detail shortly – have shown only slight signs of improvement: Housing demand and homebuilding (chart 6) continue to be restrained by weak income and sentiment, tight lending standards, and a large overhang of vacant properties (chart 7).