One of the bigger of the big issues about which bankers worry is capital structure determination: figuring out the right mix of debt capital -- or deposits of all kinds, subordinated debt, and so forth -- and equity capital to put behind earning assets.

Currently, most use a combination of judgment and regulatory signals to identify the ratio of equity capital to earning assets at which the positive benefit of decreasing the ratio -- or earning a higher return on equity -- just balances with the negative effect. The downside is greater exposure to the risk that an unplanned shortfall in net revenues -- revenues less noninterest costs -- will cause a collapse in earnings, damage to the bank brand, and subsequent decreases in demand.

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