We cannot be confident, therefore, that the cyclical experience of the past few decades is necessarily a reliable guide to how things will develop. In its policy deliberations over several months, the Board has weighed conflicting trends. When we were last before you, we were observing an apparent moderation in inflation.
Building on the three pillars of the Basel II framework, we need to develop a more resilient capital framework that has multiple safeguards built into it. First, we need to improve risk coverage. One of the most procyclical dynamics has been the failure of risk management and capital frameworks to capture key exposures in advance of the crisis.