Indeed, sound risk management by all market participants would reduce moral hazard. Market participants familiar with the risk metrics, the stress-test methodologies (and the associated market scenarios), the models, and other analytics used by their counterparties’ risk managers would be more likely to continue to provide access to credit during periods of systemic and institutional stress.
Of course, the more that privately provided credit continues to flow in such circumstances, the lower the odds on a crisis and on the need for government intervention. It is a tall order to “plan” for the unexpected, improbable, and unknowable nature of future financial market crisis, but actions by the authorities, such as supporting risk-management policy groups and promoting stress-testing, should help.