Obviously, this is only a starting point and managers of financial institutions and supervisors need to keep their eyes and ears open for new developments in the financial system. Both need to ensure that the institutions they manage or supervise comply with the rules but, equally importantly, they need to examine what is going on in the system as a whole.
In some cases, supervisors’ perspectives will differ from those of bank management, and supervisors clearly face different incentives from bank management. Where they reach different judgements they need to be prepared to use their discretionary supervisory tools to buttress the rules that are in place. In the end, ensuring financial stability requires as much attention to supervision as it does to regulation.