performance measurement across business and product lines as a basis for their analysis. these methodologies frequently incorporate different kinds of volatility - based measures that include a view of unexpected loss, along with more subjective measures of risk. while many of these systems and methodologies are still in their early stages and require refinement, i am encouraged by their development, and hope that the assessment of capital adequacy will continue to be a primary focus of risk management at banking institutions. the senior management of banks can take this further by evaluating not only the adequacy of their current capital levels, but also the appropriateness of their capital structure. ideally, this analysis would lead to a process that integrates decisions about business strategy, risk profile and future capital needs. as banks become better at identifying and quantifying their risks, they should be well positioned to enhance risk disclosures and inform investors more fully. while bank investors ultimately bear the risks of the institution, too frequently they are not in a good position to make knowledgeable business decisions about a bank ’ s prospects. certainly, investors are less well informed than bank management. in many countries, accounting and disclosure standards do not provide users of financial statements with the necessary information to appropriately assess risks and determine soundness. a lack of transparency discourages capital from flowing efficiently and, in effect, reduces or even destroys value. however, on a positive note, i am encouraged by progress in numerous countries to promote disclosure and transparency, for instance with regard to non - performing loans. the basle committee on banking supervision, the committee on the global financial system, the international accounting standards committee and other organizations have put forth initiatives to enhance the relevance, reliability and comparability of information disclosed by the financial sector. the most important initiatives will be those of national governments to apply these accounting and transparency frameworks, as well as the voluntary disclosures of financial institutions. now that i have discussed the changing risk environment and how banks are responding to that challenge, let me turn to what this means for the current regulatory capital regime. today, a major challenge for regulators is to develop capital standards that address more comprehensively the full range of risks to which banking institutions are exposed. these standards must also improve the differentiation among high - risk and low - risk exposures and between weak and strong institutions. additionally, they must be flexible enough to accommodate the risks of newer and emerging activities, some that i have mentioned today. as you know, the primary tool of

this respect? but the same question is valid for the second pillar of president klaus ’ s thinking : what is the appropriate level of public intervention : the nation state or the european level? president klaus believes in culturally or ethnically homogenous societies as opposed to multiculturalism. therefore a parliament can only be legitimate at the level of a nation, which does not exist in europe. as a consequence supranational institutions are not democratic. “ the european preoccupation with europe is connected with the fact that europeans were made to believe that the era of nation states is over and that, because of omnipresent externalities and because of artificially built belief in the importance and inevitability of continental - wide public goods, europe must be unified and therefore organized, constructed, controlled and regulated from above, said mr. klaus in a recent visit to india. giving more power to the european parliament is an illusion. “ softening the rules and relying on the offer of variable geometry would be a mistake. such procedures already exist ( euro, schengen, defense, many temporary exceptions ) and have always been something of a ratchet. while the idea of european federalism certainly has followers in every european nation, at the level of decision - makers, the prevalence of nation states seems to be unquestioned in the present perspective. the long - term objectives are more open, and one has to admit that european integration is seen as a dynamic difficult to stop. in a speech " small countries and europe – 90 years after masaryk ", you quote tomas garregue masaryk who stressed that " history is a process of integration, but at the same time of disintegration ". in a globalised world are there really no common goods that are better delivered at a supranational level? have education, security, health research, for example, not a european dimension? how can nation states react or accompany economic agents in activities which are less and less linked to the nation state? is the real debate not better encapsulated in a clearer consensus on subsidiarity? are the present boundaries in europe representative of homogenous nation states? what do we do about emerging regionalism? again, as with the first pillar, what can we learn from the history of our continent which has experienced different models : domination of one nation state over europe, more or less holy alliances among the biggest, stifling coalitions, anarchy