In the insightful words of Independent Senator the Honorable Subas Ramkhelawan during his December 2012 contribution to the debate on the Securities Bill, “financial regulation on the whole is like the building of a fortress, and it is important in the building of a fortress that all the walls must be equally fortified, because the marauders at the gate will always look for the weakest point to infiltrate.” A major weapon in the building of our regulatory fortress is the Insurance Bill 2013.
Because the current standard largely ignores the relative risks of different assets, it encourages banks to shed over-capitalized, low-risk assets and to retain high-risk assets for which capital requirements are too weak In short, the increasing sophistication of markets demands that, to be effective, regulatory capital charges need to be reasonably attuned to underlying economic risks.