versus those that could not. banks have criticised these proposals, since traditionally capital exists to protect a bank against only unexpected losses, while reserves are held when bank expects to experience credit losses. we are now seeking to revise the treatment of credit losses to calibrate capital only to losses that are not anticipated - or “ unexpected losses ” - and we have issued a proposal for comment on how to do so on our website. we will continue to evaluate the soundness of our assumptions in the new accord and their relative degrees of conservatism in the final months ahead. competition and the balance between flexibility and consistency applying the new accord consistently across countries is an essential goal for the committee. by incorporating minimum standards in the new accord, we want global competition in banking markets to be driven by each bank ’ s strengths, rather than by differences in each country ’ s rules. moreover, pillars two and three were created to a great degree to level the playing field for banks by encouraging more consistent supervisory approaches and public reporting. to advocate greater consistency in the application of the new rules, the committee created the accord implementation group to share experiences and encourage shared approaches. we expect these discussions to help supervisors apply the new accord more consistently and to encourage greater cooperation among supervisors, which was one of the three words - together with balance and consistency - that i mentioned at the beginning as guiding the committee ’ s work on the new accord. based on the implementation group ’ s work to date, the committee published a paper last august on the “ high level principles for the cross - border implementation of the new accord ”. in this paper, we reiterate our view that the traditional allocation of responsibilities to home and host supervisors will continue. cooperation will be critical for effective supervision under the new accord, especially considering the need for an internationally active bank to receive the approval to adopt, and then validate, advanced approaches to credit and operational risk at home and in host jurisdictions. similarly, supervisors will need to find practical ways to cooperate in the evaluations of capital adequacy under the second pillar and ongoing reviews of compliance with the minimum operational requirements of the new accord. the implementation group and the core principles working group, which is made up of senior regulators from a variety of countries plus representatives of the world bank and the international monetary fund will meet for a second time in december to continue the discussions on issues related especially to the responsibilities and cooperation of home and host supervisors and issues that significant or systemically important foreign subsidiaries

the new accord may be appropriate. but others may feel that their banks are not yet ready and may decide, after careful review, that it would continue to apply the 1988 basel accord for several more years as banks continue to strengthen their risk management capabilities. i want to emphasise that the basel committee supports the decisions of those supervisors who believe that their markets may not yet be ready. we would encourage those countries that choose to remain on the 1988 accord to look to the principles of the new accord, and especially to strengthen the second and third pillars. moreover, whether a country intends to implement the new accord by the end of 2006 or perhaps later, the basel committee recommends that supervisors everywhere encourage their banks to strengthen their abilities to identify, measure, and manage the full range of risks they face through internal processes. at the same time, i am very encouraged to hear that banks and supervisors share the notion that none of our countries, regardless of our stage of development, can foster our own economic growth unless our banks are adequately capitalised and well managed, our financial systems stable, and our markets transparent and open. i believe that the new basel accord goes a long way toward achieving and strengthening those three objectives. certainly we hope that, over time, more banks and more banking systems will adopt the more advanced approaches to risk measurement and management laid out in the new accord. when banks are adequately capitalised and well - managed, they are better able to promote growth by providing credit to consumers and businesses alike. but more broadly, when banking systems worldwide are adequately capitalised and well - managed, the international financial system becomes more stable, better able to promote sustainable growth, and more resilient during periods of distress. thank you for your attention.