Under these conditions, GDP is expected to grow by 3.2% in 2000, and perhaps by roughly 3% in 2001. All components of GDP were favourably oriented, in particular corporate investment, which grew by about 6%. Household consumption also made a significant contribution to growth despite the strong rise in retail prices during the year, which were impacted in particular by raw material and oil prices. Foreign trade made strong headway and generated a current account surplus that was still substantial 1  BIS Review 115/2000  despite the oil shock, reflecting in particular the continued buoyancy of service trade. The current account surplus for the first nine months of 2000 amounted to EUR 23.6 billion. The labour market benefited from the continued growth. According to INSEE (France’s national institute of statistics and economic studies), some 485,000 net salaried positions were created in the market sector during the year. The unemployment rate according to the ILO definition stood at 9.4% of the labour force in October, down by 1.6 point year-on-year. The sharp increase in the prices of imported goods, due chiefly to oil price developments and the depreciation of the euro, translated into a sharp acceleration in the consumer price index, with a yearon-year increase of 2.2% in November. These developments call for vigilance, particularly since the underlying index, excluding energy and food prices, also quickened steadily throughout the year to reach a year-on-year increase of 1.4% in November, compared with 0.7% in December 1999.

The new approach amplifies the focus on institution-specific risks in the supervisory assessment and rating process. Importantly, the framework serves to mutually enhance understanding by the institutions and the Central Bank of the inherent risks faced by the respective institutions, and thereby establish the common expectations regarding the management and control of those risks, taking into account the nature, scope, complexity and risk profile of the institution. This process, in turn, facilitates appropriate supervisory and institutional responses that are proportionate to the risk assessments of individual institutions and their systemic impact. Similarly, the implementation of the risk-based capital framework for insurers will further reinforce the regulatory focus on risk. The adjustments to this framework will take into account the feedback received from the industry on the concept paper released by Bank Negara Malaysia in December last year, as well as the results of the impact study that was concurrently carried out to assess the potential capital adjustments required by insurers. Specifically, the adjustments to the framework are being made to achieve greater consistency between the valuation bases for assets and liabilities, and to fine-tune the asset risk charges. A second consultation paper, incorporating these changes, will be released for further industry comments later this year. Insurers will no doubt welcome the greater degree of investment flexibility that will be allowed under the risk-based capital framework. It is an important improvement over the current "admitted assets" framework, and one that is also expected to significantly raise the profile of the investment management function within the industry.