the recession. but the relationship between the economy and the financial system also works in the opposite direction and, evidently, if the necessary measures for reactivating employment growth within a reasonable time frame are not adopted, bad debts will continue to mount and there will be more financial institutions facing difficulty in providing the financing needed for economic recovery. that our banking system has proven reasonably resilient during the international financial crisis is due to various factors. these include prudent regulation, more intensive supervision than that of other countries, a business model geared essentially to retail banking and sound management at most banks. but let me also stress – as it seems to me an example of what could be done now with the labour reform – that the government and the opposition, which has supported it in parliament, have expeditiously agreed on a series of high - quality financial system reform measures that have proven most effective in preventing credit institutions ’ problems from bringing the country ’ s economy to its knees. we should not forget that if, for instance, the legislation on the funds for the acquisition of financial assets and on guarantees for bank and savings - bank bond issues had not been approved, we would no doubt have witnessed a shut - down of wholesale funding on global markets and an abrupt contraction in credit that would have led to a deep recessionary spiral. fortunately, this did not occur. that does not mean that credit standards are the same now as before the crisis. one of the most notable consequences has been the increase in risk aversion, which stood in the previous upturn at very low levels. this increased risk aversion translates into much stricter lending policies. as a result many companies, particularly small and medium - sized ones ( for various reasons, such as the fact that they are not audited and are generally less capitalised than large companies ), have seen their ability to obtain funding restricted, occasionally beyond what may be considered reasonable. the official credit institute ’ s programmes, aimed at smoothing small and medium - sized companies ’ access to credit, have attempted to correct this market failing. further work along these lines should be pursued, improving where possible the workings of these programmes and increasing their volume if necessary. yet i must urge credit institutions to be responsible, as i have on previous occasions. evidently, at a time such as the present, they must be particularly careful and, naturally, not extend credit to companies that are not solvent ; but nor must they forget that should they fail to lend but a single euro

##ive hours of discussion with the committee, its working groups and member authorities. above all, banks and other private sector bodies helped us to ensure that supervision would be more closely aligned to sound industry practices. a second group would be those supervisory agencies, central banks, multilateral financial institutions, and other public authorities around the world who shared with us the perspectives and needs of banking systems that are based in many different markets, economies, and legal systems. thanks to discussions with these colleagues, such as through joint working groups like the core principles liaison group and through regional consultations and meetings, the committee was better able to ensure that the new framework would be relevant to many different kinds of banks and economies that are in various stages of growth and development. the cooperation of so many public authorities worldwide has helped to make basel ii a truly global product. the committee will continue to seek opportunities to deepen its relationships, and its opportunities for discussion, with other supervisors and central banks in the months and years ahead. of course, this work would have been impossible without the sponsorship of the bank for international settlements. i would like to offer my sincere thanks to malcolm knight, the general manager of the bis, for his institution ’ s support of our work on basel ii. the bis has been a staunch ally and advocate for our work over the entire thirty - year history of the committee. with regard to basel ii itself, the bis is fostering a greater understanding of the new framework among central bankers and supervisors worldwide through programs organised by its financial stability institute, the “ fsi ”. the committee looks forward to continued collaboration with the bis on matters related to financial stability. basel ii represents a genuine success story in international cooperation. and we know that our need to cooperate and to collaborate does not end when we release this framework. indeed, under basel ii, supervisors and central bankers will need to work even more closely together in the future, especially in view of the evolutionary nature of basel ii. and the committee has a full agenda ahead of it. we must, of course, continue to work on the specifics related to the implementation of the framework and its calibration. we must also ensure that the new framework keeps pace with market developments and advances in risk management practices. as we carry out this work, the committee intends to continue its discussions with the industry and other supervisors in the same open and transparent manner as we have to date. it has been an honour for me to participate in and help to lead this process