Some thirty years ago, the founders of the Committee recognised the growing need for cooperation and consistency in the supervision of internationally active banks. As we prepare to adopt a new capital framework, we know that we supervisors will need to cooperate even more in the future to supervise an internationally active bank’s adoption of the more advanced approaches to credit or operational risk. The Accord Implementation Group was created under the leadership of Nick Le Pan, the Canadian Superintendent of Financial Institutions, precisely to share experiences and approaches to applying the new rules. By sharing information on practical matters, we expect that supervisors will apply the New Accord more consistently at home, thereby promoting a more level playing field across countries as well. Based on the AIG’s work to date, the Committee published a paper this past August on the “high level principles for the cross-border implementation of the New Accord.” In this paper, we reiterate our view that the traditional allocation of responsibilities to home and host supervisors will continue. Cooperation will be critical to the effective supervision of institutions under the New Accord, especially considering the challenges an internationally active bank will face in receiving the initial approval to adopt, and then validate, advanced approaches to credit and operational risk at home and in host jurisdictions. Similarly, supervisors will need to find practical ways to cooperate in the evaluations of capital adequacy under pillar 2 and ongoing reviews of compliance with the minimum operational requirements of the New Accord.

You have shared data on technical issues, and you helped to make our quantitative impact studies possible. Your efforts have helped to inform ours and have assisted us in strengthening the quality of our proposals. We will take the time needed to consider the comments with care to ensure that we meet the high standards you expect from us, which is to develop an intellectually sound and also pragmatic and cost-efficient proposal. The members of the Committee and I understand that our efforts must not be unnecessarily constrained by deadlines and timetables, although we all believe strongly that it is important to move forward with the New Accord and bring it to finalisation as soon as possible. Overall, the comments we received through the consultation were constructive and in many senses positive. Indeed, even among the most critical of respondents, one finds support for most of the New Accord. There is support for its three pillars and its intentions to align capital more closely to risk; to introduce greater consistency in the supervisory review of capital adequacy; and to promote effective market discipline by enhancing transparency. It was, moreover, satisfying for us that most commentators acknowledged substantial improvements in the proposals since the release of the second consultative paper in early 2001. Not unexpectedly, respondents have raised a large number of points worth closer consideration. Some letters addressed fundamental concepts as well as several issues that have been debated throughout the entire process.