My observations will be on: (1) the nature of future crises; (2) their implications for the role and the conduct of EWE going forward; and (3) some suggestions on what should constitute the important components of the EWE process. First, on the nature of future crises. One criticism we often hear about EWS in the past is that the system is often good in replicating the last crisis but is less useful in anticipating future crises. This point I believe has been echoed also in today’s seminar. A key reason for this is the way the EWS models have been calibrated to fit the explanation for the last crisis, and hence, becomes less useful for anticipating future crises when circumstances or the risk factor change. Similarly, lessons learned from the previous crisis tend to over-prepare policymakers for a repeat of a similar crisis, thereby leaving them vulnerable to the new cause of the next crisis. Therefore, for EWE to be useful, it must have the ability to anticipate the nature of future crises with certain accuracy. This, of course, is going to be a demanding task, but it is this quality that the EWE process needs to have. This is because without certain degree of accuracy, it will be difficult to persuade policymakers to collectively become engaged in addressing certain risk and vulnerabilities.
Thank you. BIS Review 19/2010  3