As I noted earlier, changing technology and market practices are undermining the current accord at the largest institutions. They have also added to the complexity of modern banking organizations, a complexity already in progress from the increasing scale and globalization as well as from a widening range of banking activities.
These factors and the associated moral hazards from bank supervision and the increased systemic risk from scale have left supervisors with a choice between more extensive and burdensome supervisory oversight, on the one hand, and increased reliance on market discipline coupled with a more incentivecompatible regulatory and supervisory framework on the other. That is what the three pillars are all about.