BIS Review 6/2009  3  Finally, a third factor that, in my view, needs to be addressed is the excessive pro-cyclicality of the financial system in its entirety, i.e., the tendency of the financial system to accumulate too much risk and leverage in good times, and to shed risks hastily in a downturn.
We should endeavour to systematically eliminate wherever possible the elements that reinforce or amplify the spontaneous cyclicality of the financial economy. In particular, but not exclusively, we have to reassess from this point of view capital requirements, valuation and leverage, provisioning regimes as well as banks’ compensation schemes.