"We need to grow faster and generate the excess capital to win the arms race over the next decade."

"We felt it would result in the generation of excess capital and high returns."

That excess capital could be spent on acquisitions or to buy back stock, he said.

Drexel had about $500 million in excess regulatory capital when the transfers began.

"They said you have got to keep your excess capital in the broker-dealer."

Now, she says, she can use that excess capital to reinvest in the firm.

The heart of Japan's problem, many experts say, is that it has not managed to find ways to invest its excess capital in profitable businesses.

Wachovia also anticipates that it will have $1.7 billion in excess capital available after the merger to buy back stock.

"But Morgan Stanley, like its peers, has excess capital and is under pressure to put it to use."

Many banks have built what they view as excess capital.