We have all chosen implicitly, if not in a more overt fashion, to set our capital and other reserve standards for banks to guard against outcomes that exclude those once or twice in a century crises that threaten the stability of our domestic and international financial systems. I do not believe any central bank explicitly makes this calculation.
But we have chosen capital standards that by any stretch of the imagination cannot protect against all potential adverse loss outcomes. There is implicit in this exercise the admission that, in certain episodes, problems at 3  BIS Review 34/2000  commercial banks and other financial institutions, when their risk-management systems prove inadequate, will be handled by central banks.