A critical element of these frameworks, and thus ultimately of a stable and well-functioning financial system, is the undertaking of holistic risk assessments by those who manage financial institutions and by those who regulate them. These holistic risk assessments are not easy to undertake, involving as they do both systemwide and more detailed, disaggregated views. But neither are they impossible.
While each situation is different from the one before, there are a number of system-wide variables that need to be monitored carefully.