If we were to de-link capital requirements from risks and, therefore, potential losses, we would have to deal with unhealthy consequences. In a crisis there would not be sufficient capital to cover increasing risks and losses, as we would incentivise weak banks to take on high risks in pursuit of high returns.
The consequences for asset https://www.rba.gov.au/speeches/2018/sp-ag-2018-10-11.html  2/6  10/11/2018  Supporting Growth in the Short Run and the Long Run | Speeches | RBA  prices and financial stability have been dealt with at length elsewhere, including in the  Stability Review as I have already mentioned.