This speech is primarily about policy guidance; it will not itself provide new policy guidance. We all need guidance from time to time – we look to our parents, teachers, partners and peers for their help to make life, career or major financial decisions. Ultimately, though, these decisions are ours to make, and the consequences ours to bear.
Third, supervisors should encourage institutions to develop more robust models which use more prudent and reliable assumptions and stress testing methodologies; and monitor more closely the internal processes, and controls for managing risk. Fourth, there is a need to rationalise the regulatory and supervisory prescriptions with a view to reducing the scope for arbitraging.