Risk management, however, except through the holding of large amounts of foreign reserves, remains relatively poor. Finally, domestic financial markets in Asia are less developed, with only limited capacity to create high quality safe assets. And as a result the high level of savings in Asia has been invested in foreign assets produced by AMEs.
The new approach to supervision is now more focused on the assessment of the quality of risk-management practices and generally allows banks to take on greater risks so long as the banks demonstrate the ability to identify, measure, manage and price for those risks.