think that the most “ efficient frontier ” involves a mixture of minimum rules, tempered by supervisory discretion, and supplemented by market - based incentives. current industry practices and issues that arose in consultations let me now move to current industry practices and how transparency is incorporated into the basel framework. in deciding to revise the 1988 accord, the basel committee thought carefully about what improvements to banks ’ public reporting would mirror the new accord ’ s incentives - based approach to foster improvements in risk management. in recent years, the committee has noted some improvements in the quality of bank reporting worldwide. annual surveys conducted by the committee suggest that the extent of banks ’ public disclosures has increased markedly in some areas. still, important deficiencies remain. for example, in 2001 - the most recent date for which comparative global information is available - the most prevalent disclosures covered accounting and presentation policies, on a bank ’ s capital structure and its measures of capital adequacy, and, for those that had them, on the kind of market risk models the bank used. few banks disclosed much about their credit risk models, the types of credit risk mitigation techniques that they employed, or even the external or internal ratings assigned to their credit exposures. the relative paucity of data available publicly on a typical bank ’ s credit risk profile appears inconsistent with the fact that, for most banks, credit risk remains the single most important source of potential losses. at present, market participants seem to know only little about the extent of most banks ’ exposure to credit risk. one could conclude that it seems unrealistic today to assume that they have enough knowledge of a bank ’ s position to exercise properly a benign influence on its handling of credit risk. disclosure practices do not seem to have kept pace with the very rapid evolution in the ways that banks take on, measure, and ultimately manage their risk positions. incorporating market discipline into the new basel accord to improve the ability of markets to contribute to greater stability in the banking sector, the new accord will contain a series of disclosure requirements. the committee views pillar 3 as a further refinement of accounting standards requirements as they should apply to banks in the light of the specific risks they face. some of the requirements may furthermore be tied to a bank ’ s eligibility for adopting an advanced approach to credit or operational risk or for recognising the benefits of particular instruments and transactions in mitigating risks. we based our decisions on the information that should be disclosed on the following principles :

higher than anticipated in many euro area countries, and especially in spain and italy which both saw an unexpected surge in private consumption. however, the reopening effects are expected to dwindle and economic growth to slow in the short term, in view of households ’ loss of purchasing power, the energy crisis, weaker global demand, tighter financial conditions as a result of the monetary policy normalisation, and the highly uncertain economic and geopolitical setting. indeed, the latest data for the third quarter point to a rapid economic slowdown in the euro area countries. the purchasing managers ’ indices ( pmis ) signal a contraction in manufacturing in the big euro area economies in the third quarter, while the pmi services index points to a considerable slowdown, with a contraction in germany and italy. thus, the gas market developments described above contrast with developments in other commodities – such as oil and non - energy goods – whose prices have tended to moderate since the summer owing, among other factors, to the prospects of a global economic slowdown. inflationary pressures are stronger than expected and are spreading across expenditure items, exacerbating the loss of purchasing power inflationary pressures in the euro area have been more intense and more persistent than expected throughout the year. euro area inflation stood at 9. 1 % in august. higher energy prices are the main factor behind these high inflation levels. indeed, it is estimated that, between their direct impact on energy goods in the consumption basket and their indirect effect through other goods and services, they are responsible for somewhat more than 60 % of the growth in inflation. yet the increase in food prices is also very significant ; in fact, food prices are directly responsible for almost 25 % of the increase in inflation. in any event, inflationary pressures have gradually spread to the less volatile prices in the consumption basket. higher production costs have passed through to consumer prices faster than expected, against a backdrop of manufacturing bottlenecks and demand pressures associated with the economic reopening. underlying inflation in the euro area was over 4 % in august, and over 3 % in all euro area countries. moreover, inflation was over 4 % in more than half the underlying inflation components ( in 41 % of them in spain ). particularly notable was the higher inflation in components relating to expenditure on transport, household equipment and maintenance and, especially in spain, recreation, hospitality and tourism. 4 the economic projections for the euro area have undergone significant revisions, with growth revised down and inflation revised up the recent