Nonetheless, looking beyond the current proposals, I believe that over time the regulatory capital functions we have hard-wired into Basel II, along with their embedded correlation assumptions, will give way to individual bank-developed models that are verifiable by supervisors. That development will probably be a central part of the evergreen process.
But the time for individual bank models is not now, and I see no reason to hold up improving the regulatory capital regime until the state of the art permits that innovation. Until then, I think we have developed a workable balance between flexibility and comparability. As the old saying goes, the perfect should not be the enemy of the good.