In the Category, 'Droll Footnotery'

In honor of the Nobel Prize in Economics scheduled to be announced this coming Monday, the HSIB Academy announces a new award, The Smartassy. The initial recipients are; Mike Mariathasan, University of Oxford, and Ouarda Merrouche, The Graduate Institute, Geneva, and CEPR,

One could imagine that enhanced supervision improves a bank's internal model, e.g. because it involves additional testing. Since internal models are typically bank specific, however, this would require assuming that the (external) supervisor has skills or information regarding the banks risk-taking  that are superior to the skills and the information available to the bank. In our opinion, this is unlikely to be the case.

That's footnote 14 in their May 2013 discussion paper,  The Manipulation of Basel Risk Weights. In which, while they only confirm the obvious; that poorly capitalized banks responded to the incentives they faced from Basel II, they do it so stylishly that someone ought to take notice.

We assume they thank the little people who made it possible.