If you invest in either of these, you are not promised all of your investment back, though of course you expect to make a positive return. Such an investor ordinarily expects the full return of their investment, but this is not assured. Investment in debt and equity can of course be managed on a collective basis, as asset management. You may remember the Woody Allen quote that a stockbroker is someone “who invests your money until it’s all gone”. Cruel I know, but it illustrates the difference between deposits, other forms of debt and equity. A distinguishing feature of banks is that by providing deposit contracts, far more of their liabilities take the form of value certain contracts. This alone makes capital and solvency critical for banks. In contrast, for asset managers, the contract does not promise such value certainty. Two particular conditions need to be met in my view to make asset management effective and robust to wider economic conditions. First, that there is no lack of clarity of the nature of the assets held under management. Second, that there is no illusion give to investors about  1  Anat Admati and Martin Hellwig: “The Bankers New Clothes: What’s wrong with Banking and what to do about it”. P38–40  BIS central bankers’ speeches  1  liquidity of their assets. It follows therefore that capital and solvency matter much more for bank supervision, and market liquidity conditions matter more for asset management supervision. So bank capital matters a lot.
2  BIS central bankers’ speeches