Many QIS4 participants reported difficulty computing LGDs (which must reflect downturn conditions), in part because their data histories were not long enough to capture weaker parts of the economic cycle. To address this problem, the agencies have proposed a supervisory mapping function that can be used in the interim by those institutions unable to estimate appropriate downturn LGDs.
In response to these strains and the dislocations they cause, a new round of protectionist steps is being proposed. These alleged cures would make matters worse rather than better. They would do little to create jobs; and if foreigners were to retaliate, we would surely lose jobs.