the current account : • trade view, • savings / investment view, • asset view. trade view : cyclical and growth asymmetries between economic regions worldwide have contributed to the emergence of global imbalances. however, trade - related factors cannot explain the magnitude of the imbalances observed. 2 / 7 savings / investment view i : global imbalances largely reflect low savings in the us ( fiscal and private ). the gloomy side of this perspective emphasises the widening fiscal deficits in the us and / or bubbledriven wealth effects in private consumption ( housing market ). the benign perspective focuses on a wealth effect rooted in higher us trend productivity growth resulting in higher risk - adjusted returns on us assets and correspondingly strengthened demand for us assets by foreigners. savings / investment view ii : imbalances reflect structural changes in savings and investment patterns in other parts of the world. the most prominent advocate of the global savings glut hypothesis is the chairman - designate of the federal reserve, ben bernanke. trade and asset view : imbalances reflect more or less stable policy incentives – export - led growth strategies in asia and reserve accumulation in the aftermath of the asian crisis ( bretton woods ii hypothesis ). asset view : globalisation of financial markets reduces home bias and increases room for manoeuvre for financing of current account deficits. this position has been defended most prominently by the current chairman of the us federal reserve, alan greenspan. but let us be clear : such isolated explanations may be helpful in highlighting certain aspects, but it should not be forgotten that, for a highly endogenous variable like the current account, the fundamental causes of the deficit affect goods and capital markets and a wide range of asset prices simultaneously. to quote roger w ferguson jr on this ( 2005 ) : “ but any compelling explanation of the current account deficit must identify not merely the proximate influences on the deficit – be they exchange rates, capital flows, or aggregate saving and investment – but also the fundamental, underlying sources of the imbalance ”. i do not want do go more deeply into the specific empirics of the us current account. suffice it to say that, in my view, all these causes can explain certain parts of the us current account deficit – albeit at varying levels of importance : productivity increases generally prove to be significant explanatory variables for current account changes. in general, empirical studies do not find much support for fiscal deficits

those who are responsible for the design and implementation of the processes. i think these principles set out clearly what supervisory expectations are, and should provide a useful steer to the industry. our work on validation will accelerate over the coming months, although our focus will be more on sharing and cataloguing information and approaches, and not on trying to develop a prescriptive method. as we have stated in our principles, the primary responsibility for validation lies with the banks themselves. close dialogue with the industry in our work will, of course, be of great importance. in turning to my conclusions, i would like to use this opportunity to make a brief comment from my perspective as governor of the banco de espana. although i have talked about the work underway in the aig on implementation, you are probably also aware of similar work being conducted in europe, by the committee of european banking supervisors, which is seeking to promote consistency and convergence in the application of basel ii in the eu. as i have said on other occasions, i believe that basel ii represents a great opportunity for the eu – as a single market - to lead the way on international convergence, and i hope that we can seize this opportunity. certainly, the progress made by cebs so far is encouraging in this respect. conclusion coming back to the points i made earlier, even considering the ongoing work on trading activities under basel ii, i believe that the vast majority of efforts being undertaken by banks and supervisors alike today related to basel ii are focused on implementing the very good rules that have already been developed. i believe that this should be the committee ’ s main focus for the near term. it is important as well to remember that basel ii is not meant to be an exercise in compliance. its goals are to improve the quality of risk management across the banking sector ; to strengthen the resilience of the financial system ; and to promote more sustainable economic growth for the good of both consumers and businesses alike. i look forward to continuing to work with you as we all enhance our efforts to make those goals a reality.