It is clearly very important that the New Accord be implemented in a consistent manner across various jurisdictions. Market competition should be driven by each bank’s strengths, rather than by differences in each country’s rules. Accordingly, the Basel Committee established the Accord Implementation Group. As you know, this group is responsible for promoting the consistency and quality of implementation of the New Accord and facilitating the exchange of information among national supervisors about bank and supervisory practices. Through the implementation group senior line supervisors are beginning to share among themselves very practical insights on how to assess internal risk management processes. We think that this detailed sharing of information among people who are on the front lines of supervision will go a long way to ensuring that assessments can be done in a more consistent fashion across jurisdictions. We appreciate the very strong endorsement that both the BBA and LIBA have offered in welcoming the formation of the Accord Implementation Group. Indeed, we know that both associations are keenly interested in how the group may well help ensure that a single banking organization active in many jurisdictions not face divergent sets of expectations from different banking supervisors under the New Accord. I am pleased to note that the Accord Implementation Group has taken up this concern among its first topics for discussion. An important goal of the coordination and information sharing is to help ensure that national supervisors, in assessing the eligibility of an internationally active bank’s internal rating system, do not arrive at different conclusions.

Senior management, and, to a significant extent, the board of directors, will have to have a good understanding of various key elements of the organization’s ratings process - the design of the rating system, the methods of assigning and reviewing ratings, the process of developing and using the necessary data, the approach to developing reliable quantitative estimates, and ultimately the consistency of the system with Basel standards. Understanding these various elements will be important in assessing the appropriateness and reliability of the measures of credit risk that are developed - measures that are in turn needed for senior management and the board to make more informed strategic decisions. Operational risk is another area where the Basel Committee has developed a new regulatory capital approach. In this area, as with credit risk, the Committee not only attempts to build on banks’ rapidly developing internal assessment techniques, but seeks to provide incentives for banks to improve those techniques, and more broadly, their management of risk, over time. This is particularly true of the Advanced Measurement Approaches to Operational Risk, or AMA. Under the AMA, banks would be able to use their internal methodologies to assess their exposure to operational risk - subject to a series of qualitative and quantitative supervisory parameters that are intended to ensure that the approach used is comprehensive and that it is implemented with integrity. Moreover, the AMA is intended to be sufficiently flexible so as to accommodate the rapid evolution in operational risk management practices we expect to see over the coming years.