By implementing prudent regulations, conducting effective risk-based supervision, promoting transparency, doing timely interventions, and maintaining independence and accountability, supervisors can strive to strike an optimum balance that fosters stability while minimizing moral hazard risks, ultimately contributing to a resilient and sustainable banking sector, which can support the real economy. 3.
Indeed, supervisors have come a long way from being mere regulatory compliance enforcers to becoming risk-assessors. New supervisory tools aim to instil a forwardlooking and calibrated supervisory approach based on principles of proportionality and risk perception. This approach involves constant focus on emerging risks and the business models at the Supervised Entities (SEs). 4.