As a result, they generate under-provision of supervision, then of capital for troubled banks with a cross-border and/or systemic component. In addition, national supervisors may more easily be subject to regulatory capture. Both facts undermine financial stability.
Some progress has been made; the Bureau of Economic Analysis estimates that an acceleration in inventory liquidation accounted for almost one-half of the reported decline in real GDP in the first quarter. As stocks move into better alignment with sales, a reduction in the pace of inventory liquidation should provide some support to production later this year.