Borrowing Quote by Evan Davis
“It is no wonder that bank capital is regulated. When borrowing and lending is profitable, it is tempting for banks to scale up their operations and to borrow and lend too much in relation to their capital, in effect reducing the effectiveness of the potential capital cushion.”
About This Quote
Source Speech: Financial Regulation Forum, 2023
Banks tend to overextend when profits are high, weakening capital buffers that protect against losses.
In simple terms: Banks overgrow and risk capital safety.
Key Takeaway
Limit growth to preserve capital.
Themes
finance
risk management
regulation
Mood
cautious
analytical
Type
policy
economic
When to use this quote
- bank lending decisions
- stress testing
- policy design
Key Concepts
capital adequacy
moral hazard
systemic risk
Questions to Reflect On
- How can banks balance profit with safety?
- What safeguards can improve capital resilience?
A Different Perspective
Regulation may stifle innovation if too strict.
![“When the fountains of government [borrowing] abundance began to dry up, when through lack of funds and the impossibility of negotiating fresh loans the state was forced to check the extension of bureaucracy and to put a stop to public works, then and then only did the Italians realize what it…” quote by John T. Flynn](https://sms4smile.com/quotes/img-quotes/908/john-t-flynn-18493_abundance_when-the-fountains-of-government-borrowi_2663.jpg)
