This varies by university and department.
In theory you should always have a performance curve if you have a large enough sample size.
This does not mean that 1 standard deviation away has to fail.
It does mean that some students will do better than others. You can set performance targets however you want, if we desire to create an education system that supports students so that -2σ can still perform at a competent level, well you have a system that supports 97.6% of students. (Although I'd actually say that performance target is somewhat unrealistic for a country in which only a mid 80% of students currently graduate high school.)
Universities don't have the resources, time, or motivation, to educate 97% of the population, so they are going to put policies in place such as "more than -1σ and you fail out".
There is no need to employ that en-masse to all education!