permissible for ais to rely on intermediaries to carry out checks on the identity of potential customers and the source of their funds, the ultimate responsibility still rests with ais to know their customers and their customers ’ business. intermediaries should therefore only be used if the ai is satisfied that they apply due diligence standards and procedures as rigorous as those of the ai itself and are “ fit and proper ”. it helps in this respect if the intermediary is itself regulated or is the member of a reputable professional body. the ai should monitor the track record of the intermediary and the performance of the accounts that it introduces. all relevant identification data used by the intermediary to verify the customer ’ s identity should be submitted for review by the ai. this latter requirement is not currently mandated for all intermediaries in our current guideline ; and we will need to consider whether this exception is still appropriate. a further issue relates to the treatment of client accounts opened by solicitors or accountants. at present, we allow such intermediaries to rely on professional secrecy codes as a reason for not disclosing the identity of the underlying principals. non - disclosure may be acceptable in the case of pooled accounts where the funds held by the intermediary are co - mingled at the bank. but where the account is opened on behalf of a single client, the justification is much less clear. again, this is an area where change may be required. existing customers as i have already mentioned, it is likely that ais will have to upgrade their due diligence procedures in some respects to comply with changing international standards. obviously, these enhanced procedures would be applied to new banking relationships. but this begs the question about what should be done in relation to existing customers. to what extent should institutions go back and undertake renewed verification of the identity of existing customers? our current view is that we should not impose an across the board requirement in this respect, but it would certainly be sensible to review those existing customers who fall into higher risk categories. the six major banks in the uk have just announced that they will undertake a risk - based initiative of this type. i would encourage those ais with a large customer base to do the same. other triggers for review of existing records may arise when a customer undertakes a significant transaction and where there is a material change in account operation or customer documentation standards. the way forward these are some, but by no means all, of the

encouraged excessive leverage and risk taking and excessive concentration of exposures among major financial institutions ”. the insistence on the words “ insufficient ”, “ inadequate ” and “ excessive ” shows that, in particular, more and better buffers are expected. the crisis has given rise to a unique momentum for profound reform of the financial sector. we should not let this momentum slip away. i know full well that the return to more simplicity will be anything but simple. of course, i realise that a lot of technical issues have still to be resolved. and i admit that it will be important to introduce the new regulations in a timely manner so as not to repress the smooth flow of credit which will be required to support the nascent recovery. in fact, while there is much discussion at the moment on the design of the exit strategy from the public support measures, we should be equally aware of the need for an entry strategy for moving over to more comprehensive regulatory requirements. but all these considerations should not be an excuse for prevarication and delaying the essential decisions to take for the design of a more comprehensive framework. the crisis has seriously dented belief in the ability of the markets to regulate themselves. while it would be illusory to dispense with the assistance of the market in designing new supervisory and regulatory arrangements, these market consultations have more often that not been used by many financial institutions as a channel to lobby for softer regulation, certainly in the past and probably still today. the rapid spread of the financial crisis has also served as a lesson for supervisors. it has shown that the root of the problems was not linked to any specific difficulties faced by individual institutions but, rather, to the gradual build - up of common risks within the system. it is now widely acknowledged that such crystallisation of risk, linked to major shifts in the correlation between financial products and markets, requires more systemically - focused oversight and regulation. to use the professional jargon, micro - prudential control, the preserve of the supervisory authorities, must be complemented by macro - prudential oversight, resorting to the expertise of central banks. to improve the symbiosis between these two approaches, a growing number of countries are adopting the so - called “ twin peaks model ” where the central bank is in charge of the full range of prudential supervision, in both its micro - and macro dimension, leaving the oversight of market integrity and investor protection to a separate institution. just a few weeks ago,