“Five years ago, the financial regulators of the United States — and more broadly the world — didn’t see the storm coming.
Would they if a new one were brewing now?
The answer to that is far from clear. The regulators have more information now, and they have applied the tools they have to measure risk with more vigor.
But a new assessment from a little-known agency created by the Dodd-Frank law argues that the models used by regulators to assess risk need to be fundamentally changed, and that until they are they are likely to be useful during normal times, but not when they matter the most.”
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