Concomitantly, while the risk of an overreaction to the release of information would still exist, there would be no single number on which market participants could focus. A third possibility would be to have supervisors release aggregate results of their horizontal, forward-looking assessments, along with details about their assumptions and methods, without requiring additional disclosure by firms.
This approach could still confer considerable benefits by providing information to the public about the overall condition of the banking system as well as about supervisory methods. It has, in fact, been applied by Japan’s Financial Services Agency (FSA), which conducted a special bank inspection in 2002 and 2003, when Japanese banks were still recovering from a crisis.