. ” to the ramparts caruana defended the accord, saying the u. s. decision to apply the new rules to only the top 10 banks - instead of all banks as europe intends - met the spirit of the accord because u. s. banks already met high regulatory capital standards. “ we respect their decision. we think this is perfectly compatible with basel ii. europe has taken a different decision, ” he said. caruana rejected concerns that it could dry up some capital markets, as banks fear, as some market activities could be assigned a higher risk weighting under the new accord. “ frankly speaking, we don't think that this is a problem. the strategic decisions that banks have already taken are based on economic capital and the accord should not change this, ” he said. daniele nouy, secretary general of the basel committee and caruana's top assistant, said in the same interview that banks already assigned a cushion of economic capital to their different areas of activities, including market activities. the new accord should broadly follow existing practices. “ we don't anticipate as many changes as people believe, ” she told reuters. “ the important thing is that economic capital will be close to regulatory capital. ” but caruana did acknowledge the need for further study, especially on how diversification of banks'activities across business lines and economic zones. “ we do not recognise properly all the diversification that a bank has when it has exposure to several markets, ” he said. “ we need to know what the best practice is so it can be incorporated. ” potential future risks posed by credit derivatives exposure would also require more work, nouy said. “ there are many different practices in the industry and we simply do not yet know which is the best one going forward, ” she said. consolidation not a goal caruana distanced himself from speculation that the new accord could drive sweeping strategic changes in the financial sector, including mergers and acquisitions, saying it was not the committee's goal to drive consolidation among banks. some banks, however, may conclude on their own that the new accord will increase pressure on them to join forces with other players in order to improve their business models under the new accord, he said. “ i think this will be more based on decisions taken by the industry, ” caruana said. “ we don't have this as an objective. ” caruana also rejected criticisms that the accord could punish banks in

dfid. as a precursor to this program, sbp has already formulated a microfinance strategy which aims to enhance the outreach of microfinance industry to 3 million by 2001 though efforts are underway to fast track this and to reach 10 million in next few years. in conjunction with this, sbp is working with the industry to enhance outreach by proper exploitation of the avenues available for promoting state of the microcredit summit campaign report 2007. credit for small and medium enterprises and agriculture and rural finance. while financial penetration ratio is quite low in pakistan, the growth in outreach has improved : for instance : ( i ) number of microfinance beneficiaries have tripled to 1. 5 million over the last two years, ( ii ) number of agriculture borrowers increased to 2 million by the end of this fiscal year, with agriculture credit rising from just over rs50 billion in fy03 to almost rs200 billion in fy07 ; and ( iii ) number of small and medium enterprise borrowers rose from 91, 663 in dec 2003 to nearly 190, 000 in dec 2007. 18. through this forum, i would like to invite other stakeholders including standard chartered bank ( scb ) to join us and dfid – together to further augment the financial inclusion program. pakistan has laid sound financial sector legal, policy, regulatory and supervisory framework and has now an elaborate banking and microfinance industry infrastructure which, if effectively, nurtured and exploited can pave way for better results in extending outreach.