committee with the participation of the ministry of finance, the bank of israel, and the israel securities authority. such a committee will help to significantly reduce the probability of a threat to financial stability in israel ’ s economy in the future. dealing successfully with all these challenges requires the continued effective and productive cooperation that the bank of israel has with the relevant government ministries, particularly the ministry of finance. alongside setting monetary policy and providing economic advice to the government, the governor of the bank of israel is also charged with the responsibility of managing the bank. i am proud that the corporate governance regime at the bank of israel has undergone a real revolution in the past two years. policy decisions are not made by the governor alone, but within the framework of the monetary committee. the supervisory council oversees important administrative decisions. nonetheless, there are also internal challenges facing the bank of israel over the coming years. first and foremost, we will need to find a way to maintain the attractiveness of the bank of israel as a workplace which the very best will want to join. the bank ’ s main asset when it comes to serve the israeli economy is the human resource which lies within its employees. we must ensure that this resource does not erode. bank of israel employees come to work each day in order to serve the economy and the citizens – whether it is an employee in the currency department, which is charged with the regular supply of banknotes and coins to the economy, or the economist in the market operations department, which carries out, in actuality, monetary policy and is charged with managing the foreign exchange reserves which are the israeli economy ’ s insurance policy, or the staff of the banking supervision department, whose dedication and professionalism are the guarantee that israeli citizens ’ funds which are deposited with banks are in sure hands. we all take it as a given that the check that we deposit, or the funds transfer which we carry out, always reach their destination, but this would not happen if not for the control of the accounting, payment and settlement systems department at the bank, and there is no substitute for the analytical talents and policy recommendations of the research department economists, who work constantly to try to provide answers, to both the urgent policy questions and the longer term issues in the israeli economy. all these, with the help of the people in statistics, it, and various administrative units, are the human resource that the bis central bankers ’ speeches bank of israel places at the service of the israeli economy. i have no doubt that the

of this consisting of tier 1 capital. what changes will the new accord make to these elements? the work has to date been heavily focused on the first element of the framework, the method for measuring risk. there will be substantial changes here, with the aim of introducing more risk sensitivity to the existing crude measures and to widen the coverage of the measures beyond just credit risk and market risk which was addressed in the previous review of the accord. the direction of the changes was laid out in the committee ’ s consultative paper of june last year and i do not intend to go into a description here. on the second aspect, the committee has stated that “ with respect to the definition of regulatory capital, the committee will maintain at this stage the existing rules set out in the 1988 accord. ” in other words, they will not at this stage be revising their definition of capital. just to remind you, this definition of capital broadly divided capital into two tiers, of which tier 1 mainly consists of shareholders equity and reserves and tier 2 of certain subordinated debt instruments and an element of general provisions. there have been some modifications to the definition since 1988, for instance to introduce another layer of less permanent capital to back short term trading risks, and more recently to accommodate some more innovative types of issues which can be aligned with tier 1 for capital purposes ( but with debt for tax purposes - an outcome which i believe is technically described as “ having one ’ s cake and eating it ”! ). it would of course be intellectually more satisfying to be reviewing the whole framework together, but the committee ’ s decision not to revisit this definition at this time is, i believe, a defensible pragmatic one : modernising the denominator is proving quite difficult and contentious enough without involving the numerator as well. that said, there is a discussion which needs to take place at some point as to whether the definition has achieved the right composition of elements and emphasis on those elements. how much capital does the system need it is on the third aspect of the framework that i mainly wish to offer some thoughts today, that is, on the level of capital that should come out of the framework. here again, the committee has signalled a “ no change ” or at least a “ no change in aggregate ” intention, by saying that “ the committee believes that the new framework should at least maintain the overall level of capital currently in the banking system. ” we should of course be under no