NOT raising capital during the credit crisis has so far been a sign of strength. May it now be turning into a source of weakness? As regulators and shareholders demand a more cautious approach, the bar is being raised on what constitutes an acceptable level of protection. Banks that have resisted seeking new capital are under scrutiny, and none more so than Barclays and Deutsche Bank.

The questions are particularly pointed in Europe, where regulators have cleaved to the Tier 1 capital ratio, a measure of capital based on the riskiness of bank assets. That had some unfortunate results. Some assets that were assumed to be safe turned out to be booby-trapped. Many banks gamed the rules by shunting assets into off-balance-sheet vehicles, where capital charges were lower. In America supervisors also kept an eye on the leverage ratio, which measures capital as a share of total assets, no matter how risky they are.

Change is in the air. Some banks have already hiked their Tier-1 targets, in expectation of a harsher economic climate and a more robust stance from regulators. Royal Bank of Scotland, whose huge £12 billion ($24 billion) rights issue was approved by shareholders on May 14th, has raised its target for both Tier 1 and core Tier 1 capital (which strips out impure types of equity such as preferred shares).

Crédit Agricole, a French bank that unveiled plans for a large rights issue on May 15th, has also boosted its capital targets. Bertrand Badré, the bank's finance chief, told analysts that regulators were signalling that a mark of 8% for Tier 1 capital, and 6% for core Tier 1 capital, may emerge as minimum requirements (in line with the existing averages for European banks but above that of some institutions). This sense of the ground moving is what dogs Barclays, a British bank with a core Tier 1 ratio of around 5% that has so far held out against calls to boost its capital.

Deutsche Bank's Tier 1 capital is strong by comparison, but it finds itself under the microscope for its high level of nominal leverage. Number-crunchers at Citigroup calculate that the Wall Street banks were 30 times leveraged at the end of 2007, compared with 59 times at the German bank. Recent analysis by Dresdner Kleinwort puts Deutsche alongside Barclays at the foot of a balance-sheet league table of European and American banks (see chart).

Deutsche argues that such comparisons are misleading for two reasons. The first is technical: Deutsche switched to International Financial Reporting Standards at the start of 2007, a move that forced it to gross up the value of its abundant derivative exposures. If the bank were still reporting under its old standard of US Generally Accepted Accounting Principles, its assets would shrink by some 30%, bringing it closer to the Wall Street average.

The second reason is more fundamental: the bank argues that the health of a balance sheet should be judged by what you own, not how much you own. Deutsche says that its exposure to toxic assets is manageable. Although further falls in the value of assets like Alt-A mortgages would hurt, they would not chew up too much equity. And if push came to shove, it would be able to shrink its assets because of its strength in liquid markets such as repo agreements and swaps.

These arguments have some force. American banks may be more strongly capitalised than European ones, but many were worse at avoiding trouble. Capital hold-outs might also argue that a rebound in market prices could turn some write-downs into write-backs, quickly bolstering equity. The problem for Deutsche, and for Barclays, is that they face a far more sceptical audience of investors and regulators. “If it comes down to ‘trust me', then the answer is ‘no',” says one analyst.