Credit capital requirements are important for banks, and they depend on two key factors: the likelihood of a borrower defaulting and the amount lost if they do. This study looked at how uncertain these factors are and how it affects the amount of capital banks need to hold. By analyzing real data, they found that when these factors are related, the risk of needing more capital increases significantly. In fact, banks may need to increase their capital by up to 66% to cover this risk.