Move towards riskbased supervision, and changes in prudential regulation and supervisory oversight to address cross-border activities would be important steps in this regard. 18. For successful integration, economic fundamentals need to be and remain strong. Local markets need to be properly regulated and supervised. If market fundamentals deteriorate, speculative attacks will occur with capital outflows generated by both domestic and foreign investors.
The Financial Action Task Force and the standard-setting bodies housed here at the BIS have called for banks to engage in careful risk assessments. But, as many of you are already aware, some banks are engaging in what they call “de-risking” – simply ceasing to engage in lines of business that are seen as potentially high risk relative to their profitability.