Can Banks Regain Public Trust?

Before you try interpreting this speech, let me tell you a story.

Imagine you’re going out for a night on the town. You take your wallet and your keys off the dresser table as you leave the door. You look in your wallet and notice you have quite a lot of cash in there. You don’t want to carry too much, what if something happens? You have a good idea of how much you’re going to spend, but what if you need to get a taxi home? What if you feel like a fancy beer instead of the cheap, on tap stuff? How much extra money are you going to carry around with you for unforseen contingencies?

Why am I mentioning this? Well, our speaker mentions the Basel Accords, and the fact that they stipulate how much of a ‘capital cushion’ (his words) banks must have. A few minutes of Googling and I’m pretty sure this ‘capital cushion’ is analogous to the ‘carrying around money’ I talked about above; money that is there just in case. It seems like a good idea to me; if you’re in hock up to your eyeballs (economists call it “excessively leveraged”) it’s a good idea to have something in your back pocket in case someone unexpectedly asks for their money back.

I wasn’t sure how to interpret “cushion” so I sniffed around Google. For the record, Chinese does have a word for the thing you sit on, but ‘capital cushion’ literally translated is just confusing. Wikipedia let me know that a “capital cushion” was actually something to do with a “capital adequacy rate”, something that does have a Chinese equivalent: 资本充足率.

All in all, I think I got through this alright, but it was a struggle sometimes. Good luck in your practice.