The aim of this paper is to analyse how banking firms set their capital ratios; i.e., the rate of equity capital over assets. In order to study this issue, we develop a theoretical model which considers an optimum capital rate distinguishing between firms not affected by capital adequacy regulation and firms affected by regulation. This theoretical model is tested by estimating a disequilibrium model using data of Spanish commercial banks.

Key words: capital rate, capital adequacy regulation, disequilibrium model.
JEL Classification: G21, G28, C34.