As a result, the SCB combined two separate capital frameworks into one and simplified the overall capital regime for large banks. 2  -7surely as a present-tense lack of liquidity. In these ways, bank supervision can act as an early warning system and identify risks before they metastasize into problems that drain a firm’s financial resources or liquidity position.
Yet as important as the practice of supervision is, these examples also show that it is inherently more judgmental, nuanced, discretionary, variable, and opaque than the practice of regulation. And variability and opacity breed distrust, even when that distrust is not at all merited.