For any country, the banking system is one of the most critical elements of its economic infrastructure. This is as true for a country whose banking system comprises mainly overseas-owned banks, as it is for one whose banks are predominantly locally-owned.
Central banks’ capital adequacy and the definition of financial buffers are usually caught in a tension between, on the one hand, domestic laws, which vary considerably in their definitions of capital and its components, and, on the other hand, systemic balance sheet growth, which is a necessary consequence of central banks‘ interventions in the financial and economic crisis.