As part of the forward-looking assessment of stress, various supervisory tools have been designed to identify vulnerable borrowers who have less ‘distance to default’ as well as vulnerable banks based on various parameters. Early Warning Systems and supervisory Stress Testing have been made an integral part of prudential supervision.
A notable feature of recent regulatory reforms is far greater emphasis on rigorous standards of corporate governance within firms. Many of these standards are equally applicable to central banks. It is imperative that in the context of expanding central bank mandates, and in some cases large organisational change, we endeavour to meet and sometimes exceed these standards in certain areas.