Excessive capital requirements will make markets more chaotic – Myron Scholes

Requiring banks to hold too much capital will result in more volatile financial markets, according to a Nobel prize-winning quantitative analyst.

Speaking at an event hosted by Japanese bank Nomura, Myron Scholes said setting capital requirements that are too onerous would mean banks would need too high a return for intermediating in the markets, and that as a result their "correcting influence" would be absent.

"If you restrict or require more capital of banks, what will happen is that they