Basel III does a great job of reducing a bank’s ability to overstate or double count capital, however loopholes remain if regulators are co-operative.
Southern European countries are desperate to ensure their banks are adequately capitalised without having to inject taxpayer money. By guaranteeing to reimburse banks for deferred tax independent of whether the bank is profitable, Greece, Spain, Italy and Portugal have achieved just this. This guarantee is worth up to 40% of capital for some banks but what is it worth if from a sovereign like Greece close to default? Stricter Governments like the UK are doing the opposite and threatening to curtail a bank’s ability to recover these assets.
See this FT article for a good explanation.