The industry is in for a major regulatory overhaul, and one area that's getting lots of attention is capital ratios. The conventional argument goes something like this: the failure or forced sale of so many banks indicates that Tier-1 capital reserves were not adequate. More capital would have prevented intervention.

Not all believe the issue is so cut and dried, however. The banking industry operates on confidence much more than some policy makers might care to admit. John Douglas, a partner at Paul Hastings, Janofsky & Walker and general counsel to the Federal Deposit Insurance Corp. during the S&L crisis, points out that many banks that ran aground in 2008 had capital ratios well above the required minimum set by regulators; had their capital ratios been a few percentage points higher it's unlikely they could have weathered the evaporating market confidence.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.