This finding is even more pronounced if we take into account the fact that the LEI study is based on the assumption of constant return on equity (ROE) thus potentially underestimating the long-term benefits of higher capital and liquidity requirements. Similar conclusions are provided by Miles et al. (2011) who estimated the costs and benefits of higher bank capital.
By using data on the UK banks they show that even proportionally large increases in bank capital are likely to result in only a small long run impact on the borrowing costs faced by bank customers. They estimate the average cost of capital for banks to increase by a relatively minor 10–40 basis points when the bank capital doubles.