Capital adequacy has received much attention since the Basel Committee on Banking Supervision’s work in the 1980s, and even more so since the 2007–08 Global Financial Crisis and related work on Basel III. Simon Amrein’s book is therefore particularly relevant. In the surge of historical scholarship on banking regulation in the wake of the Global Financial Crisis, most of the literature has focused on regulation. By concentrating on capital in banking, Simon Amrein examines a subject at the crossroads of banking practices and regulatory pressure. Thus, he makes a valuable contribution to both the literature on the history of banking and banking regulation. The book has four particular merits: it is comparative (comparing Switzerland, the United Kingdom, and the United States), it has a long-term perspective (covering the nineteenth and twentieth centuries), it combines quantitative and archival analysis, and it is concise and clearly written.

The book is organized into six chapters, following a chronological progression from the nineteenth century to the Basel I agreement of 1988. Chapters address evolving ideas about capital across the three countries, the impact of the world wars, and regulatory responses to banking crises. An epilogue (Chapter 6) analyzes developments from Basel I to today.

An important quality of the book, particularly in Chapter 1 but evident throughout, is the attention given to the difficulty of measuring capital, especially in a long-term perspective. The book offers valuable insight into how capital has been measured and perceived over time and across countries. It addresses missing data and methodological challenges and provides carefully reconstructed figures. This is welcome because not many publications do so. Amrein uses the Basel I framework to reconstruct long-run capital ratios. An interesting first result (Chapter 2) on the evolution of capital ratios since 1840 (1880s for the United Kingdom) is worth noting: they have declined steadily. In the 1840s, capital ratios were about 50 percent in the United States and Switzerland. By 1900, they were around or below 20 percent, and have been below 10 percent from 1948 to the 2000s.

This was due to structural changes in balance sheets, particularly the rise of government bonds, as well as to changes in shareholder liabilities and the presence of hidden reserves. Capital has never been limited to paid-up capital: extended forms of shareholder liability existed, such as unlimited or double liability (in the United States). In Switzerland, only 20 percent of capital had to be paid up since the Code of Obligations of 1883. The analysis of hidden reserves is also particularly informative: they could be used to maintain stable profits and dividends to signal stability, and to avoid taxes on profit (p. 26). Hidden reserves were substantial, and the public was well aware of this.

Another merit of the book is its attention to ideas about capital, exploring, in Chapter 3, the “banking literature” of the nineteenth century across the three countries. It bears interesting similarities with what would become “regulation” in the twentieth century. Two streams of literature are analyzed here: theoretical and practical, often emanating from bankers of the time and engaging with banks’ management and practices. The chapter analyses the various writings of authors such as Walter Bagehot (United Kingdom), George Tucker (United States), and Otto Hübner (German-speaking countries). Adam Smith’s real bills doctrine became central in the United States and Europe in the nineteenth century. In the United States, an important reason for regulating capital was banks’ note-issuing activity. In Switzerland and the United Kingdom, this was more due to customers’ deposits. The chapter also shows that if some features of banks’ capitalization have changed over time, others have remained remarkably stable: already in the late eighteenth century, authors considered that capital’s main function was to ensure confidence and absorb losses. Amrein explains that, in the nineteenth century, capital ratios were a trade-off among various interests, such as shareholders, noteholders, depositors, and bank managers.

The twentieth century witnessed two world wars, a major financial crisis, and increased government intervention. Amrein explains that rising government debt and high inflation drove declining capital ratios and the emergence of the risk asset concept in the United States. In the United Kingdom, the Bank of England continued to rely on an informal approach and to focus on liquidity rather than on solvency. The fact that the country had escaped a banking crisis in the 1930s reinforced its confidence in that approach. Interestingly, the Bank of England refused several demands from banks to raise capital until the late 1950s. Amrein argues that crises triggered the implementation of capital requirements and that globalization and banks’ growth drove changes in the definition of capital and capital requirements (p. 175). He also highlights the rising use of subordinated debt as a form of capital from the 1970s onwards. While this is all correct, a more nuanced perspective on the relationship between regulation and crises could have helped qualify this frequent leitmotif in the non-historical literature. The regulatory architecture was shaped by other factors as well, such as international influence, regulatory competition, and competition within the financial sector. In the epilogue, Amrein rightly stresses the limits of capital and risk-weighted asset ratios as regulatory tools.

While the book’s qualities are clear, a few points could be discussed further. For example, Amrein states that government securities were assigned a 0 percent weight under Basel I, but this applied only to governments of OECD countries or those with special IMF agreements, leading to protests from non-OECD countries. Competition, especially from Japan, was also a major issue for the Basel Committee in the 1980s, but it receives limited attention in the book. It would also have been relevant to cite Thibaud Giddey’s book on the history of the Swiss Federal Banking Commission (Histoire de la régulation des banques en Suisse (1914–1972), Genève: Droz, 2019). Lastly, a general conclusion synthesizing the books’ main results would have strengthened it. These minor issues, however, do not detract from the book’s very significant contribution to the field.