Increases in Dollar Funding Premia in the Foreign Exchange Swap Market In real life, however, covered interest rate parity does not always hold, contrary to what the textbooks say. We often see periods where U.S. dollar funding costs through the FX swap market exceed the funding costs through the U.S. short-term money markets (Chart 4).
While the supervisory challenges posed by the specific sectors of the financial system may vary, devoting more time to sectors and activities perceived to be of highest risk should be prioritised. Risk-based supervision provides a rigorous framework for assessing and addressing risks and efficient allocation of resources, which can improve the efficiency and effectiveness of all supervision.