Large banking organizations are likely to become increasingly complicated and wideranging, and the banking supervisory agencies will have to adjust to that.
In my view, the adjustment will require increasing reliance on banks’ own internal risk management, and especially on internal risk classification systems; on regulatory capital linked to internal risk classifications; on supervision that focuses on evaluation of, and supervisory feedback on, risk-management systems; on market discipline; and on increased cooperation among agencies. None of these steps will be easy.