The drive by regulators around the globe to make banks hold more and better quality equity capital is causing unexpected patterns of behaviour, particularly that of shareholders calling for bank deleveraging rather than supporting new equity placements.

The reason for this behaviour is due to the Modigliani-Miller theorem not holding true in the real world, according to a paper published Urs Birchler, professor of banking at the University of Zurich and a former director at the Swiss National