An alternative is to require that firms perform regular stress tests to demonstrate that they can remain solvent and continue to lend even under stress. In the Fed’s case, it has chosen to impose all of these requirements on banks, but these requirements cannot simply be applied, as is, to nonbanks. 6  See Gorton and Metrick, “Securitized Banking,” in note 4, op.cit.
Inflation is seen to continue to slow down in 2007, with the government target of 4-5 percent likely to be achieved, in the absence of new shocks. Nevertheless, there are certain risks to inflation that need to be carefully monitored and assessed, including oil prices, possible impact of El Nino on agricultural output, wage adjustments, and possible liquidity expansion.