While these new initiatives have the significant benefit of strengthening market discipline, they may also induce some additional systemic risks, even for healthy banks, in periods characterized by heightened levels of economic uncertainty. We don’t have much experience, yet, in operating under these new ground rules.
At the same time, it is understandable that the ability of banks to repeatedly walk open-eyed into massive overexposure should lead to questions being asked about the wisdom of this change in regulatory and supervisory focus. I will not address this question here.