Having said that, we recognize that false positives are not free: They impose a real cost on examiners in the form of resource use and also on banks in terms of imposing the burden of an onsite review. In one way, effective supervision is striking a balance between false negatives and false positives, recognizing the costs of each.
As we look forward, I think policymakers will need to find a similar balance between the responsibilities of examiners and the responsibilities of banks to ensure compliance with laws and regulations and to maintain a safe and sound banking system. Make no mistake, the crisis made clear that more effective regulations and more consequential examiner reviews of banks are needed.