uncomfortable with the use of external ratings in their countries, they may opt to weight all corporate claims at 100 %, while sovereigns and banks can be risk weighted according to the risk scores of export credit agencies. this eliminates the dependence on ratings issued by external credit agencies. indeed, our discussions with colleagues and counterparts from countries outside the committee, including india, as i mentioned, have been instrumental in addressing other concerns in the capital framework. thanks to our consultations, we have endeavoured to address several other broad issues in the new framework, including the document ’ s apparent complexity and the consistency of its application internationally, which i will set out now. complexity one inevitable by - product of designing a comprehensive three - pillar framework with a range of options for different circumstances is increased complexity. the members of the basel committee certainly recognise that it is far easier to enforce a simple rule than a complicated one. however, the balance that we seek is between simplicity and risk sensitivity : indeed, the banking industry has been quite clear in saying that we should not blindly pursue simple solutions if they would result in unnecessarily conservative estimates of capital requirements. achieving a balance between simplicity and risk sensitivity is particularly difficult in an industry like banking, where a culture of constant innovation makes it a tall order for regulators to develop simple rules that fit all banking products and services in all their permutations. paraphrasing einstein, we might say that a good capital framework should be as simple as possible, but not simpler. so while basel ii is admittedly a more complicated document than the 1988 accord, i would suggest that much of its apparent complexity stems from the diversity existing in real world. the text provides multiple options in part because some banks and supervisors thought that a “ blanket rule ” would unfairly burden them. by providing a range of options, we are better able to fit the regulatory framework to each bank ’ s risk profile, rather than the other way around. similarly, some of the complexity in basel ii stems from the details we provide to promote a more level playing field. many bankers and supervisors asked the committee to provide greater details where they thought a danger existed for differences in interpretation to arise across jurisdictions. nonetheless, we have worked hard over the past years to clarify the rules, to simplify those thought to be the most complex, and to provide options for those wishing to use a simpler approach. in fact, as the basel committee demonstrated in an annex to the third consultative paper, supervisors can select

of the economic governance of the euro, the difficult position of the irish, portuguese and, above all, greek economies must be redressed. tensions are at a peak and the outcome of the situation may have very important consequences for the euro area as a whole. it is often acknowledged that european construction has been forged through the overcoming of recurrent episodes of crisis, from which the project has always emerged strengthened. let us hope this is true this time and that the european authorities ’ decisions will rise to the challenge. the spanish economy was particularly affected by the sovereign debt crisis when the greek and irish economies had to resort to adjustment programmes. conversely, when the same happened with portugal in april this year, the impact was less, despite our closer economic, trade and financial ties with this country. this was due to the set of measures that had been bis central bankers ’ speeches adopted previously to speed the approval of some reforms and thus tackle confidence problems. in any event, the spanish economy remains under the scrutiny of the markets, which continue to demand an unjustifiably high level of sovereign risk premia. in past weeks we have witnessed the effect caused by the recent discussions in europe on the potential participation of the private sector in the bail - out of the greek economy, while doubts resurfaced over the seriousness of spain ’ s commitment to pushing through outstanding reforms. the spread of the sovereign debt crisis to spain was ultimately due to the presence in our country of certain factors of vulnerability as a result of the imbalances that had built up during the previous upturn. and these were compounded by the factors that had emerged during the crisis, such as the high unemployment rate and the burgeoning budget deficit. the main imbalances accumulated in the phase of strong growth were attributable to a sharp expansion in demand that gave rise to a substantial increase in private - sector debt, excesses in the real estate sector, and price and cost increases that tended to crowd out domestic output in favour of imports, systematically raising the external deficit. the unfolding of the economic crisis further complicated the situation. firstly, because it gave rise to severe job destruction, as a result of shortcomings in the workings of the labour market. at 21 %, the unemployment level has not only highlighted the need to reform the institutional framework of this market ; the figure also raises doubts about the spanish economy ’ s capacity to restore its potential growth and ensure the sustainability of its public finances. in this respect