Whether the global spillovers from changes in monetary policy were viewed as benign or challenging depends on the relative strength of the three transmission effects described earlier, the relative divergence of conditions in foreign economies, and the flexibility of their monetary policy tools to offset divergent spillovers.
In summary, as regulator, our approach will be to identify areas of higher risk in each institution’s operations and to work with the management to reduce these risks to acceptable levels. The riskbased supervisory approach is recognized to be ideal for identifying problems at an early stage rather than attempting to fix them after they have developed.