A new set of standards known as Basel III is still being implemented. But it would take years to finalize, and even the new proposed standards are too weak: in many scenarios, for every $1 of equity a bank used, it could borrow $24. That means that the bank could become insolvent if its assets declined by as little as 4 percent. As we know from the housing meltdown, that is far too narrow a margin of error.

Requiring the largest banks to finance themselves with more equity and with less debt will provide them with a simple choice: they can either ensure they can weather the next crisis without a bailout, or they can become smaller. Banks will argue (in fact, they’ve already started arguing) that requiring them to have more equity will force them to reduce lending and, ultimately, cause the economy to contract. But banks would not be required to sell assets under our proposal; they will simply be required to raise more money by selling stock, rather than going to the debt markets. To raise capital, they could seek new equity investments, retain more earnings, limit dividends and stock repurchases, curtail bonuses or any combination thereof.

The market already requires community banks to have higher equity levels. A community banking survey by the Federal Deposit Insurance Corporation showed that community banks currently maintain capital ratios approaching 10 percent of their assets. These banks would be unaffected by our proposal, and midsize and regional banks would be required to maintain an 8 percent capital requirement.

In contrast, megabanks had capital ratios of about 3.5 percent of their assets in 2007, and about 6.9 percent in 2012, according to a recent Goldman Sachs analysis of our plan. Under our proposal, megabanks (those with at least $500 billion in assets, of which there are currently seven) would face a 15 percent capital requirement — instead of the 8 percent to 9.5 percent requirement being discussed by international regulators. Our 15 percent standard would be consistent with the historic levels of equity that banks had to maintain before the advent of the “too big to fail” safety net. Requiring the largest banks to rely more on shareholders and less on creditors would minimize the risk of a financing crunch if losses from bad investments were to pile up.

Our proposal also curtails the expansion of the government safety net for Wall Street by limiting taxpayer support to traditional banking operations. Under our legislation, financial institutions would be prohibited from transferring nonbank liabilities — like derivatives, repurchase agreements and securities lending — into federally supported banks that benefit from deposit insurance. This would ensure that the government safety net protects only the commercial bank, not the risky investment-banking arms of the megabanks. If the megabanks want to remain large and complex, that’s their choice — but Americans should not have to subsidize their risk-taking. If they fail, their executives and investors — not taxpayers — should pay the price.

We expect a full-throated effort by the megabanks to resist our proposal. The good news is that there is a real and growing bipartisan consensus around our approach. It has drawn support from key regulators like Thomas M. Hoenig, a conservative who is vice chairman of the F.D.I.C. and a former president of the Federal Reserve Bank of Kansas City, and Daniel K. Tarullo, a progressive regulator and a member of the Fed’s board of governors. Our banking system — and the broad economy — will be the stronger for it.