That pattern is particularly pronounced when the underlying economic fundamentals are less certain. Hence, the next phases – review and refinement – are the hardest to predict with precision. As circumstances dictate, some financial institutions will review and refine their capital ratios, risk metrics, and business imperatives and proceed forward.
Others may find that, in the course of review, they return to the phases of retrenchment and reliquification. Central bankers are prudent to stay alert to these changes. Without a doubt, then, this is a time of testing. Stakeholders will need to discern whether they are witnessing some impairment of the financial sector, or merely a realignment of the competitive landscape.