special capital account in addition to a core capital requirement. The special account would accrue to a bank's shareholders … as long as the bank is solvent, but would pass to the bank's regulators — rather than its creditors — if the bank fails …

diminish the value of the bank's core intermediation service? Using a banking model in which borrowers face production output …, thereby enhancing liquidity creation and the value of intermediation. Higher bank capital leads to more trading states and … that subsidizes sellers or a (selective) subsidy for buyers. Central bank loan purchases can also improve welfare …