, for instance. to that extent, an adequate cushion of capital can to a certain extent make up for shortcomings in risk identification, measurement and control. vii to come back to the original question : i am in favour of an evolutionary solution. the basle accord should be modernised and not - at present - be replaced by other concepts. there are indeed other approaches which are worth discussing, but at present i cannot identify any convincing alternative concept among them which would be operationally viable, practicable and superior to the capital accord. the capital accord itself is adaptable enough for new developments in the markets to be integrated into its system in a meaningful manner - as occurred in the case of market risk, for example. this also applies to all currently impending topics for discussion, such as on - balance - sheet netting, credit derivatives, credit risk models and new capital elements. in return, this also implies capital buffers becoming necessary for risks that have so far not been covered : given an easing of capital requirements in other areas, buffers for operational risks, for valuation risks and for concentration risks, for instance, must no longer be a “ no - go ” area. generally speaking, further qualitative requirements may also help to curb risks and hence have a stabilising impact in micro and macro - prudential terms. in that respect, the basle committee ’ s “ framework for the evaluation of internal control systems ” is especially important. quantitative and qualitative minimum standards for the use of credit risk models based on a widely used and convincing practice would also have to be specified in due course. in my view, self - regulation can have a stimulating effect, but it cannot replace an administrative supervision of banks and other financial intermediaries. to that extent, self - regulation is an approach which complements prudential supervision. i believe that this assessment is reinforced by the various bank crises that have occurred in the past and has been borne out yet again by the asian crisis. a basic stance of this kind virtually necessitates supervisors working closely with the institutions. that is very helpful for finding regulations which are up - to - date and compatible with the market and, at the same time, strengthen market discipline and do not lose sight of the stability of the overall system.

, banking supervisors would have to impose penalties which would lead to the financial difficulties being even bigger. furthermore, the market is to be informed of this for the purpose of strengthening market discipline. it is, above all, this envisaged sanction - so it seems to me - which meets with considerable reservations on the part of many institutions and supervisory authorities. i am quite doubtful whether institutions would be prepared to go that far in terms of disclosure. at the risk of exaggeration, and relating to the concept of the bank as a whole, the pre - commitment approach represents a bank ’ s promise that it will not become insolvent. if that promise cannot be kept, it will remain an open question - at least in critical cases - whether the supervisors can or will impose sanctions. a proposal by the g - 30, which goes further than the pre - commitment approach, amounts to leaving supervision and the development of regulatory strategies basically to the market or to a small group of major international financial institutions. the involvement of supervised institutions in the development of regulatory standards is not new in principle. it has been tried and tested. whenever certain methods have become state of the art, supervisors have always been ready to adopt such standards as binding - as was latterly the case for the recognition of internal models for market risks. nevertheless, there may be problems, for example, if there are no administrative sanctions to enforce the standards. how binding would they be? trusting solely in an effective market control, pre - supposes a comparatively high degree of transparency. as in the case of the pre - commitment approach, it appears to be questionable whether all the market players would be prepared to disclose their risk positions and losses to the market, for example. that would simultaneously mean them revealing market expectations, trading strategies and other business secrets. furthermore, it would not be greatly surprising if the interests of this select group of institutions were not identical with the general interests of the financial industry. in particular, there is the possibility of competitive distortions at the expense of smaller institutions. as mentioned above, the possibility of supervisory standards, including voluntary self - regulatory standards in the private sector, causing new competitive problems should at all events be avoided. v as concepts, the pre - commitment approach and self - regulation as proposed by the g - 30 can indeed supply important and thought - provoking ideas. given the present prudential standard, the advantages of these alternative concepts consist, for example, in a reduction of the regulatory burden and