Comments on Rodney Maddock "Australian banks are strong; should we pay for them to be stronger?" 16/07/2015
I think it is important to get the balance right, as opposed to a moving goal post. It requires both the banks and the regulators to be flexible and responsive enough to deal with changes in the banking and finance industry, both in Australia and globally.It is not advisable for a capital reserve ratio that is too low to manage risks.
Equally, it is not advisable for the banks to hold capitals that are unnecessarily too high to be efficient.
Holding too little or too much capital is not good for the banks, the consumers, the economy and the regulators.There is no need to be too mechanical.
Further, the ratio may or should change with changes in real circumstances.