Supervisors have tended to compensate for the long phase-in periods by front-loading all prudential requirements, a situation that sometimes can be considered excessively harsh. Of course the long phase-in periods are often a reaction to the expected impact of the regulation on bank behaviour and, in particular, on the lending to the real economy. Some middle road has to be found. 3.
A third challenge is the need to reduce reliance on models. Recently conducted stress-tests, a core macro-prudential tool, followed a “single-model-fits-all” methodology, which left very little room for idiosyncratic and specific national characteristics. Moreover, according to some analysts, there is a risk that stress tests are becoming less effective as a tool.