jaime caruana : reform of the international standard for bank capital notes for the testimony by mr jaime caruana, governor of the bank of spain and chairman of the basel committee on banking supervision, before the committee on economic and monetary affairs, european parliament, brussels, 18 january 2005. * 1. * * introduction i am honoured to appear before the committee on economic and monetary affairs today to discuss the reform of the international standard for bank capital. in past years, members of the european parliament have kindly welcomed bill mcdonough, the prior chairman of the basel committee, as well as other basel committee representatives. i would like to thank you for giving me this opportunity to contribute to the debate and to support your important work in considering the proposed directive on capital adequacy requirements for banks and investment firms. these hearings are extremely valuable and represent a vital stage in the european legislative process, where the european parliament has a crucial role. i will be speaking today in my capacity as chair of the basel committee. but i hope you will allow me to digress on one or two occasions to supplement my remarks with my perspectives as governor of the banco de espana. the banco de espana is a central bank and banking supervisory authority within the european union ; it will therefore be a direct subject of the legislation that is enacted on capital adequacy. this legislation will not only affect the banks that we supervise, but also our own supervisory system and the tools we use to carry out our responsibilities, so i hope my additional perspectives will be useful. the publication of basel ii in june 2004 was a milestone which marked the culmination of a worldwide and unprecedented effort spanning more than five years. it involved extensive and open discussions among bankers, central bankers, bank supervisors, market observers, and the public. the basel committee published three proposals for public comment. it conducted several impact studies and it engaged in extensive discussions with interested parties. i believe that this broad and often highly technical dialogue was of mutual benefit as a learning process. it contributed greatly to the thorough examination of banks ’ risk management practices. this was necessary in order to find ways to harness recent advances in these practices to promote financial stability. it also allowed us to take into account concerns and suggestions and to make a considerable number of changes that have significantly improved the framework. let me mention, for example, improvements made in important areas such as smes, procyclicality, complexity, recognition of collateral, and the treatment of securitis

choice of these premises, the mumbwa caves, was in recognition of their historic and scientific significance. the caves are an exceptional site because of the deposits and preservation of organic remains found here. the site preserved human and animal bone in some of its 8 - meterdeep deposits. the caves are an important archaeological site as they are believed to have provided shelter to prehistoric man and, are an important centre for present day cultural activities as demonstrated by the revival of a number of kaonde - ila traditional ceremonies being conducted at the site. further, the bank was given an assurance that resources have been secured for drilling of a borehole in the area. with water provided, we can rest assured that the saplings will grow into a forest. as i conclude, i want to urge business houses in the country to develop a culture of planting trees in their various areas of operation. this act will contribute to global reforestation efforts, repair the damaged ecosystem, and engender the culture of climate change mitigation. let me end by appealing to all of us to save trees in order to save our lives. i may venture say, many of us react to the presence of trees with a pleasant, relaxed, and comfortable feeling. the bank of zambia will remain steadfast in supporting sustainable practices. allow me to extend our sincere gratitude to their royal highnesses, the national heritage conservation commission and all other stakeholders who contributed in one way or another to making this exercise possible. thank you for listening. god bless! 3 / 3 bis - central bankers'speeches