Just as the most sophisticated large banks have gone through a rapid evolution of their risk measurement, management, and pricing systems, so must supervisors follow suit. At the Federal Reserve we have ongoing projects aimed at providing supervisors with better tools to assess banks’ internal risk systems and, ultimately, to make determinations regarding the real adequacy of bank capital on a case-by-case basis.
That would probably have an effect, wouldn’t it? This point is made in some academic circles, but how should this money then be distributed? It would be up to parliaments to decide how to distribute it, but then the ECB would be directly involved in the monetary financing of governments, which it is not allowed to do.