Bank capital rules should revert to pre-2019 levels

Westpac chief executive Catherine McGrath. Source: Westpac.

A cynic might think about banks complaining about being forced to be over-capitalised as “well, they would think that, wouldn’t they.”

Because obviously holding capital is a cost of doing business if you’re a bank and, if you want to optimise your profits, you want to minimise how much capital you’re holding.

But the aim of regulation is to force banks to hold at least enough capital to prevent them collapsing under defined conditions.

So, when the rules apply to all banks, they don’t gain any advantage over their competitors if the rules are changed.

So, the real argument should be about the costs and benefits to the economy of any given set of rules.