The government runs the risk of doing nothing and being seen as reckless and ineffective when the economy slows or doing something and alienating their biggest voting block - the baby boomers. Tough decisions.
The banks are going to be forced to raise quite a bit of capital though - that seems as clear as day. CBA currently uses a risk weight of 18%....which is minuscule....and he is recommending it be raised to 25 - 30%
That is a ton of equity that needs to be funded from somewhere and right now I don't think foreigners are in any frame of mind to step up on Aussie bank equity
