by curbing risk-taking incentives, the higher the leverage the bank is permitted to take on. Consequently, the risk …

. Policies that subsidize debt and indirectly penalize equity through taxes and implicit guarantees are distortive. And while … debtś informational insensitivity may provide valuable liquidity, increased capital (and reduced leverage) can enhance this … benefit. Finally, suggestions that high leverage serves a necessary disciplining role are based on inadequate theory lacking …

because it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy …

it reflects special liquidity benefits of bank debt. Even aside from neglecting the systemic damage to the economy that …

also incorrect to translate higher taxes paid by banks to a social cost. Policies that subsidize debt and indirectly … should be given directly and not in ways that encourage leverage. Finally, suggestions that high leverage serves a necessary …, and that high leverage is not necessary for banks to perform all their socially valuable functions, including lending …

debt's informational insensitivity may provide valuable liquidity, increased capital (and reduced leverage) can enhance …. Policies that subsidize debt and indirectly penalize equity through taxes and implicit guarantees are distortive. And while … this benefit. Finally, suggestions that high leverage serves a necessary disciplining role are based on inadequate theory …

model" problem, and policy answers such as leverage ratios and more reliance on backtesting mechanisms …

, whereas greater use of debt leads to a higher probability of inefficient bank liquidation. The bank's privately … leverage relative to the socially optimal level, providing a rationale for bank capital regulation. While a blanket regulatory …

This paper offers a critical survey of the swings in banking regulation, notably with reference to leverage and risk … two regulatory ratios (leverage and risk weighted capital) can be complementary, but require close and constant … and adopting exclusively a leverage constraint, higher than 9%) are indicated …