It is the combination of accounting and prudential rules which shape the incentives of investors and managers. Partial reform, limited to the prudential field for instance, will not suffice and could even introduce additional distortions. The Basel Committee has come out with a comprehensive approach to capital and accounting reform to reduce procyclicality, embodied, in particular, in the Principles for revision of IAS 39 (“Financial Instruments: Recognition and Measurement”). It should be strongly supported. Second, on leverage. Excessive leverage has been a major cause of the crisis. In many instances, it could not be detected early enough, because attention was focused on riskweighted measures of capital utilisation. There is great merit, therefore, in introducing a leverage ratio as an essential tool of macro-prudential supervision. It is also envisaged as part of the capital requirement regime as a complement and "backstop" to risk-weighted measures. It may be almost impossible, however, to use it as a binding instrument on an international basis. The reason is simple: while it is relatively easy to measure the evolution of the leverage ratio over time for an institution or group of institutions, it is almost unfeasible to  2  BIS Review 133/2009  measure it consistently across countries, due to differences in accounting regimes and banking structures. An enormous amount of work is therefore necessary before integration of a leverage ratio into the Basel framework can be implemented. In particular, full convergence in accounting measurements of both assets and capital is an absolute prerequisite.

So for example, in the most recent fielding of our survey, the panel was asked:  4  BIS central bankers’ speeches  In your view, what would you say is the percent chance that the following things may happen to the rate of inflation/deflation over the one-year period between February 2013 and February 2014? Chart 6 gives you the question in full. We have been fielding the forward inflation expectation question since spring 2008, and Chart 7 contains some time-series information from the responses. We use established statistical techniques to estimate continuous probability distributions from each individual set of responses. We then find the median of the medians of the individual distributions to represent the average forward expectation and the upper and lower quartiles of the individual medians to measure disagreement across respondents. For our measure of uncertainty we report the median of the individual inter-quartile ranges. As a complement to attempting to improve the measurement of household forward inflation expectations, we have also been investigating expectations about wage growth. Because firms and workers may negotiate changes in wages to be in line with their expected rate of inflation, data on wage expectations are an additional information source for analyzing inflation dynamics and the interaction between wage and price determination. Furthermore, discrepancies between expected changes in wages and expected inflation may affect households’ financial decisions. Despite the obvious importance of wage expectations, information on wage expectations is particularly scarce.