We estimate a dynamic structural banking model to examine the interaction between risk-
weighted capital adequacy and unweighted leverage requirements, their differential impact
on bank lending, and equity buffer accumulation in excess of regulatory minima. Tighter
risk-weighted capital requirements reduce loan supply and lead to an endogenous fall in
bank profitability, reducing bank incentives to accumulate equity buffers and, therefore,
increasing the incidence of bank failure. Tighter leverage requirements, on the other hand,
increase lending, preserve bank charter value and incentives to accumulate equity buffers,
therefore leading to lower bank failure rates.