Is this the right approach? Or should this decision be left to the commercial judgment of banks and their ability to price the risk, leaving the stability related issues to be addressed through appropriate micro-prudential measures such as risk weights and capital charges and disincentives for evergreening by other means? 19. That brings me to the more esoteric world of foreign exchange derivatives.
In addition, strong capital helps banks absorb unexpected shocks and reduces moral hazard associated with the regulatory safety nets. Finally, let me reiterate BSP’s commitment to the identification, assessment, and promotion of sound risk management practices in the financial system, which it considers as central elements of good supervisory practice.