But Greenspan said there are signs that banks are adopting new practices to minimize that volatility. He did not address the outlook for U.S. interest rates in his remarks. It is widely expected to cut the rate again, possibly as early as next month. Formal risk management systems are designed to reduce the potential for the unintended acceptance of risk and hence should reduce the pro-cyclical behavior that has characterized banking history. Greenspan said U.S. regulators should encourage banks to constantly improve their systems for assessing and managing credit risks.
Simplicity can work well, too, and for most banks that is likely to be the best approach.
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