Moreover, the longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures. Long periods of unemployment can erode workers’ skills and hurt their future job prospects. Persistent unemployment can also negate the gains made by many disadvantaged Americans during the long expansion and described to us at our Fed Listens events.
Even if there were a way to adjust required capital for the absence of an explicit charge for operational risk, the pillar II approach, let us be frank, opens up too real a possibility that operational risk will be relegated to an inferior status, with a slowing down of the current impetus to measure and manage it.