What are the costs of requiring banks to have more equity?
If banks are forced to hold 20-30% of their assets as common equity, their cost of capital is much higher. This is because the expected return on equity needs to be close to other industries, and that generally is much higher than interest rates. Typical targets for return on equity are around 20%, even in the modern low interest rate environment.

The result is that banks are much less competitive versus non-bank finance, and so would lose market share. Since non-bank financial entities are less well regulated, the risk to the system would rise if they take over lending. 

So the immediate question is: how exactly can regulators stop all risk migrating to non-bank finance? Considering the flexibility of contract law, that is not easy, since financing arrangements can be embedded into almost any commercial contract (e.g., accounts receivable). You cannot just look at existing non-bank financial practices, you need to deal with any new structures that pop up to take advantage of the situation.

Once that question is answered, we would then need to figure out how to get borrowing rates to be a relatively reasonable spread over government bonds, since the lending spreads have to cover the return on equity for 20-30% of the balance sheet.