This note explores the costs and benefits of different policy options to reduce the risks associated with credit booms, drawing upon several country experiences and the findings from econometric analysis.

The appropriate level of bank capital and, more generally, a bank's capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or...

This note explores the costs and benefits of different policy options to reduce the risks associated with credit booms, drawing upon several country experiences and the findings from econometric analysis

We find that capital in the range of 15–23 percent of risk-weighted assets would have been sufficient to absorb losses in the vast majority of historic banking crises in advanced economies. Further capital increases would have had only marginal effects on preventing additional crises....