Interest rate and other risks The Committee recognizes that in refining the measurement of credit risk, we should also take the opportunity to explore the potential coverage of other important risks, such as interest rate risk in the banking book and operational risk. For interest rate risk, we are pursuing a methodology that would require a capital charge only for so-called “outlier” banks whose interest rate risk is significantly above average. The envisioned framework for determining “outlier” banks for interest rate risk is similar to the general framework for credit risk - the most sophisticated banks would use internal measurement systems for assigning 3  BIS Review 51/2000  capital, while banks without sufficiently robust internal systems would use a simple standardized approach. The Committee is still working out a number of issues on this topic, including the definition of an “outlier” bank and supervisory assumptions that would need to be built into the standardized approach. The Committee, through its Risk Management Group, also is engaged in the development of a capital requirement for other risks, in particular operational risk. Over the past year, it has met with numerous banks and industry associations including the British Bankers’ Association. These meetings have allowed us to better understand the range of practices currently in use. Over the next year, the Risk Management Group will work with the industry to develop an evolutionary framework comprised of approaches of varying sophistication, ranging from a simple to an internal-based method.

My own experience from other, similar discussions in the central bank sphere is that solid, wellfounded arguments weigh heavily and, in practice, play a more important role than the size of the country and the possibility to press a voting button. What I know about how the ECB Governing Council works in monetary policy discussions supports this viewpoint. For my own part, I believe that too much attention has been paid to the voting modalities. Other factors can be particularly important in ensuring effective monetary policy. Personally, I would emphasise the internal discussion processes, which I believe to be vital. These should be of high quality and transparent, and provide scope for different decision-makers to become involved on equal terms. Clarity and transparency is also important externally, ensuring more precise and meaningful criticism, which in turn can improve and speed up internal thought processes. Also in these respects, there are a number of similarities between the Riksbank and the ECB. Both institutions publish assessments of inflation prospects, hold press conferences in connection with their interest rate decisions and justify and explain their formulation of policy before various political bodies. In addition, a gradual evolution of intellectual thought takes place within both the Riksbank and the ECB. It is likely that this will bring us closer together. The most significant differences, in my opinion, relate to the clarity of the assessments, where the Riksbank and other countries that work with explicit figurebased targets and publish inflation reports are clearer.