Bank capital adequacy regulation is a key tool used by regulators to make sure banks have enough money to cover potential losses. This regulation is seen as important for keeping the banking system safe and preventing banks from taking too many risks. The main idea is that if banks know they have a safety net, like deposit insurance or help from the government in tough times, they might be tempted to take bigger risks. By making banks hold more capital, regulators aim to reduce this risk-taking behavior. However, the reasons behind this regulation are not very clear or convincing.