The supervisory review of capital called for in pillar II obviously will have resource implications for supervisors around the world and may require significant changes in supervisory cultures and techniques in many countries, both G10 and non-G10. The committee will need to develop guidance for bank supervisors to use when evaluating the adequacy of internal capital assessment processes.
The continuance of low interest rate stances over a significant length of time, however, led to overabundant supplies of liquidity with accompanying side effects including a sharp rise in asset prices. As we saw in the case of the Japanese asset bubble in the late 1980s, low inflation does not always guarantee financial and macroeconomic stability.