Supervision Improved public disclosure will, we believe, not only enhance market discipline but also create further incentives for improvements in banks’ risk-management practices and technologies. Such improvements will enhance the supervisory pillar of prudential oversight.
When we experience outcomes that do not square with what our models have projected, we form new hypotheses and reconstruct the models to more closely conform with our observations. With the virtually unprecedented surge in innovation that we have experienced over the most recent half decade, many of the economic relationships embodied in past models no longer project outcomes that mirror the newer realities.