Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is Not Expensive

We examine the pervasive view that “equity is expensive,” which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made to support this view are either fallacious, irrelevant, or very weak. For example, the return on equity contains a risk premium that must go down if banks have more equity. It is thus incorrect to assume that the required return on equity remains fixed as capital requirements increase. It is also incorrect to translate higher taxes paid by banks to a social cost. Policies that subsidize debt and indirectly penalize equity through taxes and implicit guarantees are distortive. Any desirable public subsidies to banks’ activities should be given directly and not in ways that encourage leverage. Finally, suggestions that high leverage serves a necessary disciplining role are based on inadequate theory lacking empirical support. We conclude that bank equity is not socially expensive, and that high leverage is not necessary for banks to perform all their socially valuable functions, including lending, taking deposits and issuing money-like securities. To the contrary, better capitalized banks suffer fewer distortions in lending decisions and would perform better. The fact that banks choose high leverage does not imply that this is socially optimal, and, viewed from an ex ante perspective, high leverage may not even be privately optimal for banks. Setting equity requirements significantly higher than the levels currently proposed would entail large social benefits and minimal, if any, social costs. Approaches based on equity dominate alternatives, including contingent capital. To achieve better capitalization quickly and efficiently and prevent disruption to lending, regulators must actively control equity payouts and issuance. If remaining challenges are addressed, capital regulation can be a powerful tool for enhancing the role of banks in the economy.capital regulation, financial institutions, capital structure, too big to fail, systemic risk, bank equity, contingent capital, Basel.

DEVELOPMENT OF VIRTUAL EVENT MARKETING

In the last few years the Pichia pastoris expression system has been gaining more and more interest for the expression of recombinant proteins. Many groups have employed fermentation technology in their investigations because the system is fairly easy to scale up and suitable for the production in the milligram to gram range. A large number of heterologous proteins from different sources has been expressed, but the fermentation process technology has been investigated to a lesser extent. A large number of fermentations are carried out in standard bioreactors that may be insufficiently equipped to meet the demands of high-cell-density fermentations of methylotrophic yeasts. In particular, the lack of on-line methanol analysis leads to fermentation protocols that may impair the optimal expression of the desired products. We have used a commercially available methanol sensor to investigate in detail the effects of supplementary glycerol feeding while maintaining a constant methanol concentration during the induction of a Mut+ strain of Pichia pastoris. Specific glycerol feed rates in the range of 38-4.2 mg × g(exp -1) × h(exp -1) (mg glycerol per gram fresh weight per hour) were investigated. Expression of the recombinant scFv antibody fragment was only observed at specific feed rates below 6 mg × g(exp -1) × h(exp -1). At low specific feed rates, growth was even lower than with methanol as the sole carbon source and the harvest expression level of the scFv was only half of that found in the control fermentation. These results show that glycerol inhibits expression driven by the AOX1 promoter even at extremely limited availability and demonstrate the benefits of on-line methanol control in Pichia fermentation research

An Economic Approach to Article 82

This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts

An Economic Approach to Article 82

This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts.competition policy; abuse of market power

Quantum data processing and error correction

This paper investigates properties of noisy quantum information channels. We define a new quantity called {\em coherent information} which measures the amount of quantum information conveyed in the noisy channel. This quantity can never be increased by quantum information processing, and it yields a simple necessary and sufficient condition for the existence of perfect quantum error correction.Comment: LaTeX, 20 page