’ activity and the complexity of their transactions have considerably increased their exposure to operational and legal risks. the new accord grants intermediaries complete freedom of initiative. the rules and risks have been defined, in analytical terms, borrowing from operational best practices. the models and parameters for the measurement of capital requirements and their application are developed by each individual intermediary. the supervisory authorities assess them for approval and then oversee compliance. in response to an initiative of the bank of italy, among others, the accord provides for specific solutions designed to produce a better evaluation of credit risk for small loans. intermediaries may use simplified methods for the calculation of requirements, similar to those now in force. like the more complex methods, the simplified ones will on average involve a reduction in the amount of capital required, as a consequence of the more favourable treatment for small loans. it should also be recalled that the capital of many smaller italian banks is above the required minimum today. the new accord will be incorporated in a community directive ; it will be phased in between the end of 2006 and the end of the following year. simulations performed on a large scale show that application of the accord will not have restrictive effects on the supply of credit. many large banks already set the terms and conditions of loans in line with those that will derive from the new accord. under the new system it is essential that firms supply complete information on their assets and liabilities and profits and losses and on the structure and extent of their activities. this will result in firms themselves having an incentive to promote transparency and complete compliance with the rules. the economic situation economic activity is expanding vigorously at global level. it is being driven by the cyclical upswing in the united states, the other major countries of the americas, japan and other asian economies. in the twelve countries of the euro area, gdp grew by 0. 6 per cent in the first quarter of this year. its growth over the whole year is likely to be 1. 7 per cent. industrial production is estimated to have increased by 2. 5 per cent since the middle of 2003. in italy, gdp rose by 0. 4 per cent in the first quarter. consumption showed a recovery, as did business investment, which had the fallen in the two previous years. exports declined in spite of an acceleration in world demand. agriculture and services drove the expansion in gdp. in the second quarter industrial production continued to decline. according to preliminary estimates, it fell by 1. 4 per cent between the end of

realise that they have to pay for good services. listening to you, that all sounds great. is there anything that keeps you awake at night? i always sleep very well. that ’ s probably one of my strengths [ laughs ]. but to be serious, what i really do worry about is the threat of deregulation. not only in the united states, but also in europe. domestic banks haven ’ t noticed this yet. that may be, but i see a clear movement in that direction in current proposals to change european legislation. attitudes towards strong supervision are no longer so positive. after the financial crisis, politicians reinforced the supervisory function and gave it tools to pre - empt looming risks. prior to that, supervisors were often unable to react until the damage had been done. we need to watch out for the pendulum swinging back. where do you see signs of that? there are some proposals for the capital requirements directive that i am concerned about. it may become more difficult for supervisors to require more capital for certain risks. this would weaken the supervisory tools. daniele nouy ’ s term as chair of ecb banking supervision finishes at the end of the year. could you imagine taking her place? i have a great passion for banking supervision, and it will be a turning point for me when i stop 3 / 4 bis central bankers'speeches doing it. but i am convinced that job rotation is good, at all levels. it would be wrong to exclude the chair and vice - chair from this. a fresh perspective is also important in banking supervision. and for you personally? my ecb executive board mandate will then still have three years to run. i will take on new tasks there in early 2019. i won ’ t get bored. for example, what about heading the bundesbank, a position which is likely to change next year? i ’ m not giving that any thought at present. 4 / 4 bis central bankers'speeches