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Requiring banks to carry extra capital should give creditors more protection.
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Any extra cost of capital should be quite limited because the losses from a bail-in resolution are so much smaller than the losses at risk in a liquidation.
Extra capital for European banks should be raised first from the private sector, then from national governments, according to the proposal.
An alternative could be to say that if banks want to provide high levels of debt to their clients, they should hold extra capital themselves.
That should mean they hold extra capital or take less risk.
Citigroup, of course, a firm that should know a thing or two about needing extra capital.
Another threat to Deutsche and Barclays is a proposal from the Federal Reserve that foreign banks with big operations in America should be forced to maintain a local reservoir of extra capital and liquidity.
But regulators should police compliance and punish any bank found to be in breach by requiring that bank to hold extra capital.
How much extra capital?
Again, that may involve extra capital.
The extra capital will hit returns.
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