Classified bank loans, defaults, and bond downgrades have increased, but the hits to the capital of financial intermediaries have been relatively small, in part, because of the diversification of portfolios and the dispersion of risk that these new tools make possible. Nonetheless, not everyone is a fan of the increasingly widespread use of sophisticated riskmanagement models.
I would argue, although those closer to the scene might correct me, that the ECB’s approach to its regional representation reflects an evolving compromise that attempts to balance the ongoing legitimacy of national monetary authorities with the need for a practical solution to the challenges posed by the increasing number of nations within the eurozone.