Even more than before, policy needs to move from a reactive  2  BIS Review 61/2007  orientation, where we intervene in response to problems and threats, to a preventative stance in which systems are made more robust to potential shocks. Certainly it’s not the task of the official sector to stand in the way of innovation or improved efficiency.
However, we do need to minimize the moral hazard risks that might come from the increased risk capacity of regulated firms. One way to do this is to redouble our efforts to use regulatory tools – riskbased capital requirements, prudential rules, disclosure that is aimed towards strong market discipline – to align the decisions of regulated firms more closely to market signals.