the issue of unintended consequences. one that comes to mind is creating a culture of distrust and suspicion, where everyone looking over his or her shoulder. that would be unfortunate and costly. but, i think it is more likely that a different culture will result. instead, talented and conscientious people will be happy to remain at a firm or in the industry because their personal and professional values are well aligned. such employees will feel relief that they can speak up without fear of reprisal, and they can enjoy a clear conscience for having done the right thing. there is significant value in being able to sleep well at night. moreover, being receptive to diverse and dissenting views will likely yield better results. it is in the industry ’ s self - interest to deter silence, not only because money will be saved on fines not incurred for misconduct, but also because better ideas will be brought to the table. i believe that business performance will benefit from having a culture in which people feel empowered to speak up. let me give you a few examples from my own experience at the new york fed. i want employees to speak up. that ’ s why, at the start of my tenure as president, i made it clear that i wanted the “ best idea to win, ” regardless of where it originated or whether it contradicted something that i thought. in some instances, that will require people to admit mistakes. in that regard, i have to set the example that we all make mistakes, and that recognizing and addressing them head on — and, importantly, learning from them — is the best approach. a few years ago we created a new group at the new york fed called integrated policy analysis. its purpose was to consolidate teams from many parts of the organization to develop a more integrated view of the economic and financial environment to help inform our policy responsibilities. i was a strong advocate for the idea. but, after two years of effort, it became clear to me and others that it was not working as well as we had hoped. there were a lot of reasons for that, and in the end we dissolved the group and reassigned the work and staff. i let our employees know that i took a calculated risk and it didn ’ t work out. by doing this, i aimed to show that when things do not go as planned, the best approach is to address it, not to be silent. i hope that, when our people are confronted with disappointing results in their work, they

nout wellink : basel ii and financial institution resiliency remarks by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the “ risk capital 2007 ” conference, paris, 27 june 2007. * * * introduction i am pleased to join you today to speak about basel ii and financial institution resiliency. i would first like to commend the conference organisers for putting together such a comprehensive programme of events this week. i am grateful for the opportunity to discuss the basel ii framework and how it was designed to help make banks more resilient in the face of turbulent waters and constantly shifting currents. resilience comes from the latin word for “ rebound ”, which implies change from the status quo and change is the only constant in the business of banking. banks sometimes need to adjust to unexpected and unwanted shocks, though change also arises in a more positive way, such as innovation. today i will focus on our changing financial landscape and how the work of the basel committee and, most notably, the basel ii framework helps firms and financial systems to become more resilient to these changes. from my perspective, financial resiliency has three distinct elements. first, it includes the existence and promotion of sound economic and financial policies. the second element is a resilient financial market infrastructure underpinning the system, which includes sound payment systems, robust exchanges, prudent accounting standards and sensible governance standards. third, it is essential to have robust and resilient core firms at the centre of the financial system operating on safe and sound risk management practices. a sound global capital adequacy framework is critical to ensure the robustness and resilience of these firms. it is on this third dimension that basel ii plays an important role and on which i will focus my remarks. basel ii – general we are witnessing a rapidly changing financial environment, which in some cases represents a sea change from traditional practices. we have seen significant advances in technology and financial product innovation that have reshaped the role played by banks in the credit process. an example is the shift in business models. core institutions are moving away from traditional buy - and - hold strategies to an originate - to - distribute or market - based model. changes such as these create new challenges – as well as new opportunities – for bankers as well as for supervisors. innovation has led to new techniques and tools for managing credit portfolios and this has been accompanied by increased