Last week, the Financial Stability Institute (FSI) published a report entitled "Act Early or Pay Later: The Role of Qualitative Measures in Effective Supervisory Frameworks," which examines the role of qualitative measures and supervisory judgment in achieving effective supervision.
Authored by the European Central Bank's Monica Balan and the FSI's Fernando Restoy (Chair) and Raihan Zamil (Senior Advisor), the report points to the "banking turmoil" of spring 2023 as clear evidence that "no amount of quantitative requirements can compensate for banks' qualitative weaknesses." This highlights the importance of supervisors identifying and addressing such qualitative weaknesses effectively and in a timely manner, the authors argue.
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