In the context of bank capital adequacy, supervisors increasingly must be able to assess sophisticated internal credit risk measurement systems, as well as gauge the impact of the continued development in securitization and credit derivative markets. It is critical that supervisors incorporate, where practical, the risk analysis tools being developed and used on a daily basis within the banking industry itself.
If we do not use the best analytical tools available, and place these tools in the hands of highly trained and motivated supervisory personnel, then we cannot hope to supervise under our basic principle -- supervision as if there were no safety net.