The choice of policies follows by necessity from the diagnosis of the causes of the problems being addressed. And, as we address the challenges of the here and now, we cannot lose sight of the longer-term policy adjustments that we will have to make to avoid similar crises in the future.
Accordingly, in 1993, supervisors proposed to use the results of internal models for evaluating the quantitative level of interest rate risk exposure at individual institutions. While the rulemaking process was ultimately longer than desired, it did demonstrate the clear intent of supervisors to encourage and provide incentives for improvements in risk management and to take full advantage of such advances when possible.