The final, minor, element of our capital adequacy requirement is the buffer held for potential operational risks such as misconduct, property loss, systems failures, contractual disputes, etc. Perhaps the largest operational risks arise from the Bank’s responsibilities as the operator of New Zealand’s interbank payment and settlement system, and as the current owner and operator of the securities settlement system.
Because analysts keep looking for major structural reforms to fix the deeper economic challenges, they ignore smaller steps or dismiss them as “band aids”. But strategically placed small steps – strategic incrementalism for want of a better term – taken together can deal with the immediate problems, thus buying time and economic and political space for the major structural reforms.