For example, banking regulators have yet to reach a consensus on some of the most basic questions associated with prudential supervision -questions such as what is an appropriate conceptual basis for assessing a financial institution’s overall risk exposure, how should such risk exposures be measured, and if we use internal management models for such measurements, how can these models be validated?
The revolution in risk measurement techniques makes the answers to these questions approachable but not without significant effort on the part of the regulators and the financial industry itself. I am confident that all parties are both willing and able to solve the challenges that confront us. It is clearly in our mutual self-interest to do so.