Not only will banks be expected to improve their external transparency, but they will also be expected to operate more transparently internally. In particular, banks will be expected to ensure that the board of directors and senior management are sufficiently well-informed to be able to meaningfully assess the bank’s risk profile. This will place a premium on effective and accurate risk reporting. Likewise, there is an expectation that senior management will communicate effectively to employees their responsibilities with regard to the effective management of risk. Finally, Basel II will enhance clarity by promoting international co-operation between supervisors. International banking organisations have grown increasingly complex over the years, to the point that in some cases it can be very difficult for supervisors - and even for bank management - to have a clear understanding of their global risk profiles. This highlights the need for effective supervisory co-operation for such organisations. Effectively combining the necessary supervision at the local level in the host country with effective supervision at the consolidated level in the home country requires more thorough exchange of information and better knowledge of financial instruments and links within financial groups. This will heighten supervisory understanding of banks’ activities and will promote consistency in the implementation of standards, a level playing field and the reduction of unnecessary regulatory burdens. Next steps While I have focused my remarks on the new capital framework, I would like to emphasise that corporate governance is much broader than Basel II.

This condition is currently difficult to comply with, since banks are still in the process of setting up their MREL and, for some, it will not be easy to attain these thresholds as their access to the capital markets is limited, or there may be an adverse impact on their income statement. 4  BIS central bankers’ speeches  To date, the Single Resolution Board (SRB), the European resolution authority, has not taken a final, firm decision on the MREL, but everything suggests it will be demanding. At the Banco de España we advocate that the requirements should take into account the resolution strategy and should be prudent and adapted to banks’ economic and financial reality. In any event, cooperatives should build the concept of resolution into their planning and management, and continue working on the formation of voluntary and private mutual support mechanisms. Conclusion In sum, let me say that all the banking supervisors and regulators participating in this process are mindful of how important it is to finalise the Basel III review as soon as possible and of the significance of providing banks and market participants with certainty. I would not wish to conclude without reiterating the importance of a healthy and efficient cooperative sector, as it faces today’s challenges: the pressure exerted by the low interest rate environment on results, as is the case for other banks; the new regulatory demands; enhanced governance; the management and commercialisation of resources; and deeper association initiatives. Thank you for your attention.