a 50% LVR would bring a surplus back into the banks, as savers' deposit levels would rise to pre boom levels. But we know that'll never happen. What I would rather see though is that bank directors are 100% responsible for any bank failures to the point where all their assets and savings are confiscated until they are proven as 'not responsible' for the banks' demise. Once in place, banks will swiftly shift their strategies to minimise risk and to maximise security.
Things is, because these rules do not apply bank authorities can throw caution into the wind as penalties for failures are non existent, but bailouts are on hand should a collapse becomes imminent.
If banks keep lending out $90 for every $100 deposited then it's only a matter of time when they will become the legalised Bernard Madoff's of the globe. Correction; many banks already have!
