And the ubiquitous consulting firms around the world can be relied upon to spread the word of worthwhile advances in risk techniques. Still, the individual bank in each country must face the proper incentives to keep up with the most cost-effective risk techniques. Lax supervisory practices -- or, worse, government support of banks with poor risk practices -- do not provide these proper incentives.
Thus, each supervisory authority in each developed nation must be ever vigilant that the disparity between the world’s best-practice institutions and those large banks that are “inside” the best-practice frontier does not grow wider. Indeed, an important function of supervisors is to act as something of a clearinghouse for best practices.