In a recent speech, Fernando Restoy, Chair of the Financial Stability Institute, argued that strengthening supervision is key to making prudential frameworks both more effective and less burdensome.
The 2023 banking turmoil, he noted, exposed shortcomings in liquidity, interest-rate, governance, and business-model risk controls. Simply tightening rules through higher capital or liquidity requirements may yield diminishing social benefits while imposing rising compliance costs, he argued. Restoy instead proposed shifting some of the system’s risk-sensitivity from regulation to supervision, with tailored interventions for the weakest banks.
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