Regional financial institutions have been expressing that, even among small-lot borrowers, there were not a few SMEs that could make a great leap forward depending on their efforts to meet the challenges. Such opinion was a trigger for setting the special rules.
Some view capital requirements as quite burdensome, which would mean that even a 2 percent surcharge amounts to a significant tax and, hence, a strong incentive for a bank to shrink, while others have argued that capital requirements impose only modest costs, which would imply little incentive to shrink.9 This uncertainty about the ultimate effect of a given capital-surcharge regime on the size distribution of banks could potentially tip the balance back in favor of quantity-based regulation, like size caps.