None of the US and foreign banks last year that were subject to this internal models approach incurred losses exceeding its capital requirements for market risk, although a few came relatively close. On the other hand, some banks had trading losses that occasionally exceeded their daily value-at-risk calculations during the volatile fourth quarter.
My point is not that we were so smart in constructing the standard, but rather that we all still have much to learn. Risk measurement practices are advancing, and they need to. With credit risk, we are all feeling our way, again with the assistance of many large banks.