The latter, where losses flow to the top of a financial group, are associated with Single-Point-of-Entry resolutions.3 The choice of how equity and gone-concern loss-absorbing capacity should be distributed across a group is, therefore, part and parcel of deciding its preferred resolution strategy. That was not understood as international banking policy was developed over recent decades, and sets up my next issue. Reconciling the Basel Concordat, the Core Principles of Banking Supervision, the Capital Accord, and resolution policy The development of international policy on resolution is, arguably, exposing an underlying need to reconcile the provisions of various international agreements in banking regulation and supervision. There are three that are relevant: the Concordat, the Core Principles and the Capital Accord. Bear with me for a moment while I set up the point I want to make. The Concordat4 establishes the division of labour amongst home and host authorities – the foundation stone of international co-operation amongst bank supervisors. First agreed in 1975 in the wake of the failure Herstatt, updated after Banco Ambrosiano in 1983 and again in 1992 following the closure of BCCI, the Concordat was most recently spring cleaned in 1996. It is premised upon “consolidated supervision” of a banking group as a whole. What that means is that so long as the host supervisors of local outlets of an international banking group are satisfied that the home supervisor is capable of supervising the consolidated group as a whole, the distribution of capital resources across the group, both within and across jurisdictions, can be unfettered.

While emerging market economies may have different timelines and priorities, rigorous training programmes need to be simultaneously pursued to ensure that the supervisors are able to fully understand and interpret the qualitative materials, and at the same time, are able to comprehend the broader supervisory issues and concerns. Ladies and Gentlemen, The benefits of Basel II cannot be fully realised if emerging countries do not have the necessary foundation for effective implementation. In reality, some developing and emerging countries still need to develop a more efficient and comprehensive legal, accounting, regulatory and market infrastructure. The challenge for the emerging economies is therefore to place high priorities towards establishing and strengthening the fundamental infrastructure. Without the proper foundations in place, this could pose impediments to the implementation of Basel II, in addition to inhibiting the proper implementation of cross-border regulations and the effective conduct of consolidated supervision. In emerging countries where the necessary infrastructure is already in place, supervisors need to look beyond the state of the current financial landscape, in the context of the globalisation of financial services, and integration with the international landscape. Against this backdrop, the appropriate regulatory framework for the banking industry, in particular, the future of cross-border supervisory arrangements, needs to be articulated. In this regard, it is also important to recognise that the challenge of cross-border banking in the context of the increased significance of international banks has far wider implications.