The costs of a banking crisis include the direct losses borne by security holders, the massive scale and diversity of public sector intervention measures which have strained public finances and will need to be scaled back over time, and the large fall in national and global economic output and employment.
Unfortunately, such episodes are not confined to recent history and occur much more frequently and have much greater economic impact than any of us feel comfortable with. Moreover, the history of crises also shows that some of these costs are persistent. Raising capital and liquidity standards will reduce the probability and impact of crises, and bring with it large benefits.