As I remarked above, I consider this approach to be deeply problematic. The second pitfall is that we seem to have accepted that bank capital ratios are practically the only weapon in the MAP toolbox. A behavioural economist would view this focus on capital as an example of ambiguity aversion.
That is, we might be acting mainly through capital ratios for the same reason stock market investors over-buy domestic stocks – simply because we know them better.21 Like a home bias in investment, such a “capital bias” can obviously be suboptimal: we could gain by greater “diversification” of our intervention “portfolio”.