It is downheartening to say it but we must admit the very strong possibility that we may still not pick up on newly emerging risks in a timely fashion. Regulators should bear this firmly in mind and be appropriately humble in their approach, never underestimating what they are up against. 4.
Distorted incentive structure  Fourthly, I would like to point out two cases where incentive distortion challenges surveillance. If an attitude of forbearance prevails, it may well distort the outcome of surveillance. When low interest rates remain in place for a long time, the market tends to blindly expect that those bad loan assets that should be written off will revert to normal status.