The financial sector reforms designed to improve cost efficiency through price signals, in turn, facilitated the conduct of monetary policy through indirect market-based instruments through improved fiscal-monetary coordination.
Our earlier discussions with major institutions about their own processes for judging their capital adequacy supported that view. Too often they rely on the regulatory measure, itself, and on those calculations for their peers. The role of internal measures of economic risks in evaluating the level of firm-wide capital seemed generally weak and unclear.