the subsequent state transition caused significant uncertainty and hysteresis amongst banks by revealing a critical …

optimal CR is tighter relative to the pre-crisis benchmark. Optimal CR is also bank specific, and tighter for large banks than … for small banks. This is for three reasons. First, allowing small banks to take more leverage enables them to potentially … grow faster, leading to a growth effect. Second, although more leverage by small banks results in a higher exit rate, these …

largest banks are dropped from the sample. Results also indicate that it is transitory. We also find a large effect of the …