Returns to investors in banks will fall as banks increase their capital ratios, Bendigo and Adelaide Bank's chair, Robert Johanson, told the annual meeting yesterday."Increasing capital requirements, lower risk [and] more conservative balance sheets are part of the new, stricter regulatory world of banking," Johanson said.He said that returns on investment in banking in Australia "are among the highest in the world. Yet even here we should expect that the requirements for additional capital under the new rules will reduce the returns that banks deliver to shareholders.Bendigo reported a return on equity of 8.9 per cent in the year to June 2011, though the bank prefers the return on tangible equity (that ignores goodwill) of 17.3 per cent.Johanson said Bendigo planned to lifts its capital ratio - at present around 7.9 per cent - to the new minimum target of 8.5 per cent "well before" the target date of 2015. The additional capital required to meet this target is around $250 million based on the position at June 2011, or about eight months' profit.The bank will rely on the dividend reinvestment program (with a discount of 2.5 per cent to prevailing share prices) to bridge this gap over the next three years or less. It said it will also use hybrid capital where this was cost effective.Johanson also used his speech to reflect on the "rattled markets" of recent months that "confirmed Australian customers in their habits of thrift".At other banks, Johanson said, these conditions led to "talk of pay freezes and cost reductions", while "expectations of growth have shrunk or faded away".Bendigo, he said, will "continue to invest when others are not investing".The bank, he said, has "a wide range of different branded products and distribution channels and we will build on them all."He cited the wealth business as one example of recent investment that was "expanding its capability significantly".Mike Hirst, the bank's chief executive, made it clear in a separate speech that cross-selling of financial planning and superannuation products to its retail customers (where cross-sell ratios are low at present) is one priority for the bank.There will also be a relaunch of the Adelaide Bank brand next month, and catch-up investment in the platform used by mortgage managers.Hirst said that "brokers are still seeking an alternative to the major banks and we are that alternative."Shareholders at the annual meeting, meanwhile, voted down a package of amendments to the constitution of the bank. The amendments would have made it an easier takeover target, and would have cut its maximum board membership from 12 to 10.A number of institutional shareholders followed the recommendations of proxy advisers who frowned on plans to limit the size of the board to 10 directors.