Do Strict Capital Requirements Raise the Cost of Capital? Bank Regulation, Capital Structure, and the Low Risk Anomaly, Malcolm Baker, January 2015, Paper, The instability of banks in the financial crisis has led to stricter bank capital requirements, both globally through Basel III and in the U.S. through further constraints imposed by the Federal Reserve. Setting these requirements requires balancing many costs and benefits, both social and private. In this paper, we argue that an important cost has heretofore been neglected: All else equal, making banks less risky is likely to raise their cost of capital—with consequent implications for investment and growthLink