Countercyclical bank capital requirements have emerged as a popular regulatory tool to help smooth financial cycles …. The idea is to reduce capital requirements when exogenous shocks cause aggregate bank capital to decrease so that …-consistent capital regulation requires that bank capital is rebuilt gradually during financial crises. In particular, banks must be able …

This paper develops a model of an economy where bank credit supports both productive investment and individual … consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital. When policy …-term distortions related to funding equity injections. I calibrate my model and show that the bank equity capital injection that …

This paper studies optimal bank capital requirements in a model of endogenous bank funding conditions. I find that … reason is that a high requirement during the recovery lowers bank shareholder value during the crisis and thus creates …