When margin levels are set more conservatively, firms are likely to have more flexibility in responding to stress and are less likely to take action that might amplify the market shock and exacerbate the reduction in liquidity. When competitive pressure drives margins down, markets may be less resilient. Third, we believe the major financial institutions need to continue to improve their capacity to measure their exposure to risk in a less benign market and economic environment. The discipline of stress testing and scenario analysis that is designed to measure tail risk is at the frontier of this challenge. Senior management and boards of directors need to understand the limitations and uncertainty that pervade the tools we use to assess these risks, to try to better understand the potential scale of losses the firm may face, and to carefully examine how well risk exposures reflect the overall risk appetite of the firm, and the size of the capital and liquidity cushion maintained in relation to those exposures. Let me conclude by reiterating the fundamental view that the wave of innovation underway in credit derivatives offers substantial benefits to both the efficiency and stability of our financial system. The extent of these benefits will depend, in part, on the degree to which market participants can keep up with the pace of change in the market through continued investment in both risk management and in the processing infrastructure.
This creates fear and the obvious need to fight and prevent them. But common crimes do not involve huge monetary benefits. They are therefore less likely to be compromised in the law enforcement process. On the other hand, economic crimes generally do not have direct immediate impact on the publics' lives and properties because of their non-violent nature. Hence, such crimes do not receive public attention and could easily be excused as non-priority cases. Furthermore, the enormous financial benefits gained from economic crimes usually made it possible for the perpetrators to exploit their financial powers to intervene in the law enforcement process thus keeping this matter away from public scrutiny. People who are behind economic or financial crimes are usually quite smart and sophisticated. They tend to make use of their financial resources to build extensive connections in various organizations involved in the law enforcement process as well as the political system. Thus, quite different from fighting common crimes, the authorities combating economic crimes also have to fight the interferences from influential powers, which often times are far more difficult than the investigation itself. It is clear that in order to effectively fight against economic and financial crimes in any society, a strong political will and full commitment of the government is needed. The government must also recognize  BIS Review 29/2005  1  that economic and financial crimes are vicious and destructive enemies of the country, which need to be unreservedly eradicated and prevented in every way possible.