Second, systemic risk may be extremely difficult to spot ex ante. For instance, in the late 1990s the hedge fund industry was considered a main source of systemic risk, and a candidate for regulation, but this risk did not materialize.
It is delusory to think that principles applied on a standalone basis can eliminate the need for rules. Further, the rules-based system does not prevent the industry actors from the resort to interpretation and judgment. I believe that in a financial environment characterized by a fast innovation process, the regulator could grant sufficient time for the industry to develop robust practices and principles.