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Cornett et al (2011) and Kapan and Minoiu (2013) report that banks relying more heavily on stable sources of funding, such as core deposits and equity capital, continued to lend relative to other banks during the crisis. And Jimenez et al (2014) find that, in periods of economic weakness, loan applications were less likely to be rejected by Spanish banks that were well-capitalised. A recent paper by Bank of England colleagues identifies a distinct channel through which bank capital affects crisis severity (Tracey, Schnittker and Sowerbutts (2017)). They use banks’ misconduct fines as a novel instrument to identify exogenous negative bank capital shocks. They find that banks respond to such shocks by relaxing their lending standards, as measured by the loan-to-value and loan-to-income ratios on new mortgages. This is likely to increase their vulnerability to future shocks, increasing crisis severity. This evidence suggests that some of the benefits of higher capital requirements may have been understated in the original LEI study, with implications for the range of optimal capital requirements. For example, if we assumed that every percentage point of extra capital increased the level of real GDP each period in the  13  Relatedly, Demirguc-Kunt et al (2010) and Beltratti and Stulz (2012) find that poorly capitalised banks had lower stock returns during the financial crisis. And Boyson et al (2014) find that banks that entered the recent financial crisis with higher capital were less likely to see their funding dry up during the crisis.