The Bank for International Settlements has released a working paper which outlines the importance of bank capitalisation in the supply of bank lending.  The authors state that banks’ capital ratio is found to have increasing marginal impact on their ability to lend in times of financial crises than in normal times.  However, banks only turn additional capital into greater lending once their level capitalisation exceeds a critical threshold. Banks should therefore hold more capital to prevent losses from spilling over from the financial sector to the real economy, though recapitalisations alone are conceded to be insufficient to generate a sustainable recovery from a financial crisis.