In order to reduce the likelihood of excessive leverage in the banking system,governments have traditionally

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Governments have traditionally imposed capital requirements on commercial banks as a means to reduce the likelihood of excessive leverage in the banking system. This is because capital requirements force banks to hold a certain level of capital relative to their total assets, which helps to absorb losses and reduce the risk of insolvency. By requiring banks to hold more capital, regulators can also limit the amount of leverage that banks can take on, thereby mitigating the risk of financial instability. Imposing capital requirements on investment banks is not a traditional practice, as investment banks are generally considered to be less systemically important than commercial banks.

In Order to Reduce the Likelihood of Excessive Leverage in the Banking