In this connection I would like to make it clear that an increased share of own funding relative to debt funding does not entail any substantial extra costs for a credit institution. More equity capital makes the institution more robust and reduces the returns demanded by both bond owners and shareholders.
And the return on and risks related to the assets are the same irrespective of the method of funding. Moreover, right now might be a good time to boost the capital buffers as equity investors’ expected returns are currently low. *** Given the very low level of interest rates, the targets set by credit institutions for return on equity seem to be rather high.