So now it is with you bank regulator. You are the scientist. Scientist learns a lot, by observing banks and bankers. So please explain.
PS. My own humble opinion is that our bank regulation scientist friends have got themselves trapped in quite a bit of confusion. They keep on analyzing the possible failure of bank borrowers and not, as they should, the reasons for why banks fail, as entities or in allocating credit to the real economy. And that is of course not the same thing, or, as they say in French, c’est pas la même chose… For instance instead of looking at the ex ante credit ratings of bank borrowers they should look at what bankers do when they see those same credit ratings.
In other words, the regulators instead of analyzing so much the ex ante creditworthiness of bank borrowers, to determine their risk weights, should have analyzed, at least a little, the ex-post explanations for why banks fail and for why bank crises occur. Holy moly!
PS. As I see it: The world (with its banks) is much better off thinking that the risky are less risky than we think them to be, than that the "safe" are as safe as we think.