Competition has required banks to control their costs and operate with a higher level of efficiency in order to ensure their survival. This has occurred both within national borders and internationally as well. The growing sophistication and internationalisation of financial institutions, combined with their greater sophistication, have contributed to the emergence of new risks and to the intensification and rapid transmission of previously existing risks. A number of bank managers have responded by improving their risk management systems and allocating more resources to risk identification, measurement and control. Banking supervisors face the challenge of responding meaningfully to these trends without curbing financial innovation, and I believe Basel II will help supervisors to meet this challenge. Greater cross-border co-operation among supervisors The final reason that I believe Basel II will contribute to financial stability is that the growing scope and complexity of banking groups and financial markets make it necessary to increase international co-operation between supervisors. While not new, this issue is increasingly important. 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 greater co-operation, a more thorough exchange of information, and better knowledge of financial instruments and links within financial groups. BIS Review 34/2005  5  Basel II not only encourages such co-operation; its success will largely depend on the effectiveness of such co-operation. It will be necessary in the future to foster greater co-operation, co-ordination, and consistency in evaluating banks’ capital adequacy.

SEPA-related works in Poland are coordinated by the Polish Banking Association, which results from the approved model for SEPA implementation through self-regulation of the financial sector. The banking community holds consultations on payment systems with the NBP through the Payment System Council which is a consultative and advisory body of the Management Board of the NBP and follows developments on individual projects. The cooperation within the Council has led to the identification of main challenges, including currently: the specification of the pace of works performed in Poland as regards the implementation of approved SEPA standards and mechanisms, effective exchange of information between the interested parties, including those from outside the banking community, such as for instance clients of banks. The major directions of activities have also been prepared. Their aim is to prepare the Polish community for SEPA-related activities. The role of the PBA as the coordinator of SEPA works in Poland might change in the future if the approach based on the self-regulation model is discontinued in Europe and if the EU and ECB authorities apply a different model for SEPA adjustments (e.g. through issuing regulations for the banking sector) that could assume a greater role of the government and the central bank. We do not assume that this will be the case because the efficiently working self-regulation model might bring  BIS Review 97/2006  3  better solutions than a model enforced through regulations.