The proposed accord requires banks to establish comprehensive risk-management policies and then follow them. Supervisory oversight is designed broadly to test that this is occurring. Public disclosure is intended to harness market discipline so that supervisors can, in fact, be less intrusive as the market becomes more so.
Moreover, the situation is more complex if there are impairments in monetary policy transmission that extend the lag between our decisions and their impact on prices, as we see in the euro area today.