Japanese banks increased lending to the real estate sector in the 1990s despite falling land prices and low returns on real estate loans. Banks with low capital and franchise value took more risks by giving out risky real estate loans. When banks had low franchise value, the relationship between capital and risk changed from positive to negative. Requiring banks to have more capital didn't stop them from taking risks; they just borrowed more money to meet the requirement. When the government gave banks more capital, they reduced risky loans slightly. But when banks borrowed more money to recover their losses, they ended up taking more risks in the real estate sector and making the bad loan situation worse.