On the other hand, more stable, less leveraged banks would raise average ratings, improve the terms on which banks could raise funds, and lower the required return on equity. Moreover, in a competitive market, it is not at all clear that most of the costs of higher capital and liquidity requirements would be passed on to the consumer. One thing however is clear.
Raising minimum capital requirements from their current levels will involve large and permanent net benefits by raising the stability of the system and promoting more sustainable growth. Moreover, these benefits accrue immediately for every additional dollar (or Euro) of capital and liquidity. This is critical in an overall economic and financial environment of continued uncertainty and risk.