steep learning curve in familiarising themselves with the basic concepts and techniques on which the irb approach relies, and need to become more conversant with these types of risk management technique. a particularly important issue to consider that is highly relevant to today ’ s event is the standards that bank supervisors will apply in deciding whether or not to approve a bank to use the irb approach. to ensure that the capital charges computed by the irb systems are sufficient for banks to withstand the credit risks they have incurred and to absorb the potential losses resulting from borrower defaults, the estimates of the risk components must be accurate in capturing the relevant aspects of risk. as a consequence, validation of banks ’ estimates of the risk components, and the underlying internal rating systems, is crucial to the implementation of the irb approach. this is one of the greatest implementation challenges confronting bank supervisors in asia, where the development and understanding of the irb approach by banks is generally still at an early stage. no matter what supervisory approach you take in respect of irb validation, it is only one of the major questions to which we need to find an answer. banks and their supervisors in asia are going to face a variety of challenges ahead in the implementation of the basel ii irb framework. through today ’ s outreach event, i hope that there will be stimulating discussions on these issues and that participants will be able to take away ideas that can help them make the implementation of the irb framework in their jurisdictions a success. i also hope that the aigv, the aig and the basel committee can take account of the views of the asian region, and of the particular issues we face. thank you.

high. let me ask you to reflect on the following. cities such as london and new york have a reputation for being expensive. so also do of a number of capital cities in former communist countries. in a very general sense one can say that london and new york are expensive as a consequence of success as business centres and because, presumably, people still feel that there is value for money there. i leave you to judge whether the others would fit that description ; to my understanding, some of them have become expensive for rather different and less palatable reasons. i strongly believe that hong kong fits the london - new york paradigm. actually, our competitiveness ( as measured by the real effective exchange rate ) is now back where it was in mid - 1997 before the onset of the asian crisis, thanks to the sharp adjustment of property prices and reductions in labour costs, and with help from a strengthening of other currencies, notably the yen. nevertheless, although costs may now be back closer to their norm, hong kong will never be a cheap place. but when you take account of what is on offer here and the high productivity of the labour force, i hope you will agree that you get value for money. of course it is crucial for us all to pay continuing attention to raising efficiency and containing costs, but let ’ s not lose sight of the fact that emergence as a relatively high - salary, high - rent business centre is a symptom of success, not a reason for failure. i wish you all an enjoyable and fruitful conference.