to examinations and to sharing insights among examiners is another area in which significant progress has been made through our joint efforts to produce more efficient examinations. as you may know, the fdic ’ s alert system now permits examiners to download bank data onto their own pcs in order to analyze exposures and prepare for upcoming examinations. it is being used widely by many states and by a number of federal reserve banks ; more are likely to learn about and use it in the months ahead. the fed ’ s own elvis program is another important advance that assists examiners through the risk - focused process for community banks that is being used by the fed and fdic and by most states. looking forward, examiners should soon be able to use the “ genesys ” system to access a broad range of automated information contained in supervisory databases and download it into their examination reports. together, these and other initiatives - - including greater use of analyst and examiner electronic desktops, new web pages, and expanded data access techniques between state and federal supervisors - - have helped significantly to improve the efficiency of our examiners and to create a less intrusive supervisory process. we should all be pleased with these results and should expect the process to become even better in the months and years to come. conclusion in closing, i see many challenges ahead for us all, as we adapt the supervisory process to keep pace with events in financial markets. in some respects consultants and bank supervisors have much to share and can learn from one another : 1. consultants and supervisors must have open, trust - based channels of communication with bank management and among their peers. both must add value by analyzing both processes and the outcomes of those processes. they are both well advised to limit their intrusiveness while not foregoing a thorough and professional inquiry. 2. both consultants and supervisors face the challenge of building, sharing and applying professional knowledge and skills in a rapidly changing business environment. the failure to manage our knowledge within teams, within agencies and even across agencies will certainly result in wasted effort and may even result in a caliber of supervision that does not keep pace with changing financial technology and increased sophistication by banks. the federal - state coordination efforts that i mentioned are an example of this needed cooperation. however, while it might be quite appealing to speak of supervisors as acting more like consultants, in many critical ways the consulting metaphor does not work very well for supervisors. there are at least three factors that make consulting an inappropriate model for supervisors to follow

of the targeted indexes and that, as a result, the indices might end up creating rather than measuring performance. the impact of risk management techniques on market dynamics is particularly enlightening with regard to the question of asset price overshooting. value - at - risk calculations have become a crucial element of the standards approach used by market participants to evaluate the risk inherent in their market activities and set up exposure limits. of course, central banks and financial institutions should continue to encourage the use of these instruments. but, in times of financial turmoil, the growing use of homogeneous risk management techniques by financial intermediaries has had the paradoxical effect of amplifying the initial shock and the spill - over effect. regardless of the intrinsic qualities of these risk management tools, their growing use may have produced some adverse consequences. when market players rely on converging risk evaluations, they tend to take the same decisions at the same time, thus amplifying the initial shock to prices and trading volumes. all these factors have one consequence in common : they encourage homogenous behaviour and reactions to the detriment of the diversity that is indispensable to the smooth functioning of financial markets. for this reason, the authorities might reflect on some ways – in conjunction with the financial industry – to foster behavioural diversity in global markets monetary policy alone cannot guarantee the stability of financial systems, which may be jeopardised by shocks from both the financial and the real economies. however, it must be stressed that an adequate monetary policy is a fundamental prerequisite to smooth the financial cycles. an appropriate monetary stance is crucial for banks and monetary participants to base their decisions on solid ground. the objective of price stability lowers economic agents ’ uncertainty regarding future price developments. in addition, by committing itself to a long - term objective, the central bank reduces market uncertainty, which can be a source of disruption to the financial economy. interest rates and money supply are less volatile as a result, which is of benefit to the long - term growth of the economy. however important, a sound monetary policy is not enough. to safeguard the smooth functioning of the markets, and in particular an efficient pricing mechanism, it is essential to protect, and even reinforce, the diversity of behaviour on the markets. this necessary diversity is merely the echo of the different time horizons, strategies and reaction functions of market players. on this point, i would like to explore a few possible avenues for future action. strengthen the continuing efforts aiming at