Two additional mitigating factors are the significant share of households with no mortgage on their primary residence and the substantial net worth of many households. Overall assessment of financial stability Notwithstanding the deterioration in the outlook for financial stability both here and abroad in recent months, domestic financial institutions remain sound and capable of absorbing shocks.
I am aware of no other time when banks began so much before the cyclical peak to be highly sensitive to potential risks in either new or existing credits. That experience is indicative, I believe, of how better risk-management techniques can infuse the decisionmaking process with increased discipline and can focus attention on the need to balance risk and reward.