Additionally, we will cultivate further our staff’s ability to evaluate advanced risk measurement and management methodologies for operational risk, especially because so much of that work centers on advanced statistical analysis. Externally, the Committee anticipates providing more assistance, both formally and informally, to other supervisory agencies that are preparing for the added responsibilities we will all assume as the New Accord comes into force. Moreover, I am pleased to note that the Financial Stability Institute will continue its collaboration with the Basel Committee, especially in assisting supervisors globally in understanding and implementing all aspects of the revised Accord. The "FSI" anticipates that more than half of its 40 seminars and programs in 2003 will concentrate on components of the New Accord. In fact, shortly after the release of the Third Consultative Document next year, the FSI intends to offer three special seminars around the world to introduce other supervisors to the most important features of the new framework. 3. Working toward consistent implementation: Accord Implementation Group  The third area of activity will be to deepen the level of communication and cooperation among supervisors so that we implement the new rules more consistently across jurisdictions. A "level playing field" demands that international competition be driven by each bank’s strengths, rather than by each country’s rules. Within the Basel Committee itself, we’ve established the "Accord Implementation Group" as a forum for sharing information on ways to assess risk management processes under the New Accord.

Evaluating banks’ readiness  First, the member countries of the Basel Committee have begun to survey their banks’ preparation for the New Accord. Some are gathering information on how banks plan to benefit from the new framework, while others have already evaluated selected banks’ internal rating systems and databases to understand how close those banks may be to meeting the stringent requirements associated with the more advanced approaches. In all cases, we are working to understand the challenges that banks will face and are seeking ways to smooth the transition to the new framework. BIS Review 52/2002  5  2. Training and preparing supervisory staff  Likewise, supervisors in all of the Basel Committee’s member countries are laboring to make sure that they, too, will be ready for the new rules, which is a second area of focus. From the supervisor’s perspective, the New Basel Accord will require a heightened sense of the internal processes used to identify and quantify risk. This, in my mind, focuses our energy on exactly the right place – that is, how we can encourage improvements in risk management by critically evaluating current practices. Our supervisory assessments will encompass several relatively new elements – importantly, validating the integrity, accuracy and consistency of the bank’s process for assigning internal credit ratings. Since those ratings will feed directly into models used to manage credit risk, we will scrutinize more than ever their accuracy and integrity. If the initial inputs are wrong, the whole capital allocation system becomes faulty.