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2) a) Why do banks have low levels of equity (relative to debt) compared to non-financial firms? b) How does proportionally low equity financing affect

2) a) Why do banks have low levels of equity (relative to debt) compared to non-financial firms?

b) How does proportionally low equity financing affect shareholder profitability (e.g., ROE and stock returns)?

c) How does having low equity affect a banks risk-taking incentives?

d) Why did regulators decide to focus on increasing bank equity requirements instead of restricting bank activities/products to only those with low risk?

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