Capital adequacy regulation boosts bank capital but fails to reduce portfolio risk.
The study looked at how rules about how much money banks need to have on hand affect how much risk they take with their investments. They found that when banks have to hold more money, they tend to take less risky bets. However, this doesn't necessarily mean they make safer investments. Bigger banks tend to have more money and take fewer risks, but how much money they make doesn't seem to affect this.