Increased Bank Capital Requirements: Neither Panacea nor Poison

Common understanding of the effects of increased bank capital is that the more capital banks have relatively to risks inherent to their portfolio, the safer the economy automatically becomes. On the other hand it is often argued that if capital requirements are increased, economic growth needs to be sacrificed. However there exist scientific and statistical evidence that higher capital requirements alone will not make banks safer and they will neither ruin them nor have a significant negative impact on bank lending hence on the economic growth.