The question should not be how high is the bank’s capital ratio, but how low is its failure probability. In sharp contrast to our 8 percent one-size-fits-all capital standard, the internal risk-capital calculations of banks result in a very wide range of capital allocations, even within a particular category of credit instrument.
However, under this theme, many issues have already been raised and numerous discussions held. I myself have participated in many such discussions at many international forums and, I have to confess, I have been wondering about some piece missing in these discussions.