People did not know how – or were unwilling – to ask whether the rules provided adequate safeguards in the new circumstances. Behind this passiveness were many quite understandable factors. One was supervisors’ uncertainty of their legal powers to intervene in the operations of financial institutions on a discretionary basis.
That’s the way I would see it. What do you mean by gradualism? It’s the risk that our communication deviates from economic reality, which could cause a more forceful market adjustment down the road. I don’t see much merit in this.