We present a simple model of an economy with heterogeneous banks that may be funded with uninsured deposits and equity … supply of bank capital and show that optimal capital requirements should be lowered. Failure to do so would keep banks safer …

-based deposit insurance premiums, put explicit limits on the application of a “too big to fail” principle for banks and required … that examiners implement “prompt corrective action” (PCA) standards for banks. Essentially these steps were to improve the … functioning of the FDIC, especially removing discretion of the examiners in the process of addressing the risk of failure of banks …

companies. According to the new rules, the bank’s capital charge is calculated to capture credit, market and operational risk …. Banks are able to choose between standardized measurement concepts and more refined internal procedures and models which …. Limits for credit exposure of banks remained unchanged. Small and medium-sized companies should benefit both from …

We present a model of an economy with heterogeneous banks that may be funded with uninsured deposits and equity capital … bank capital and show that optimal capital requirements should be lowered. Failure to do so would keep banks safer but …