Corporate bankruptcy rates, bank provisioning and write off experience, bond yields and default experience, together with data from any banks that are on internal ratings, could all be used to help the authorities form a view of typical or average credit risk for bank portfolios in their countries. This sort of overall, aggregate monitoring of the adequacy of the standard risk weights will be particularly important for developing countries who may initially face some resource constraints in implementing Pillar 2. It should result in an overall adjustment of the weight on unrated exposures, if risks appear to be higher than the capital set aside to back them. This would need to be reinforced by supervisors assessing for all their standard-approach banks individually whether their write-off rate is compatible with the 'standard' 100% capital weight, or whether a higher figure is needed. Credit risk mitigation So there may be elements in the new Accord that achieve too little risk sensitivity but I think this was unavoidable and, with Pillars 2 and 3 of the Accord, supervisors have the scope to see that they do not give rise to problems. However, I do not want to leave this question before touching on one more issue. This is the extent of the recognition of credit risk mitigation techniques. The new risk sensitive framework goes much further than the introduction of internal ratings - another area of greatly increased risk sensitivity is the new regime for credit risk mitigation. Again, the Committee's proposals here represent a considered and careful balance.
With the high level of household debt, the rate increase will likely have a greater impact on private consumption than earlier. However, the strength of this impact is uncertain. This suggests a cautious approach to interest rate setting – a strategy we are now pursuing. 7/7  BIS central bankers' speeches