As part of the second pillar of Basel II, supervisors will discuss the results of the stress test with bank management to ensure that the banks take seriously their need to consider the dynamic management of their capital over the economic cycle. Operational Risks My comments have focused on risk management and the cyclicality of a risk-sensitive capital regime.
Virtuous dynamics such as these require: i) the implementation of an institutional framework ensuring, in the context of sectoral and corporate business, the alignment of real wage growth in the tradable sector with a rise in the sector’s productivity; and ii) growing regulatory competitive pressure ensuring efficiency gains and, therefore, cost reduction in the non-tradable sectors and, in particular, in sectors with low competition.