In such a scenario, the task of restoring confidence is not merely the responsibility of an individual bank but also a call to arms for the system as a whole.” Injections of capital can be one weapon in that cause. Capital adequacy is not everything. But without adequate capital, it all comes to nothing. Capital acts as a substantial internal buffer.
Such buffers have to be large enough to cushion any stresses and strains. Provided they are put in place in good time, lending does not have to be cut back straightaway, even in the event of a systemic shock.