fairly recent trend, but one that clearly stands out, is the rapid advances in credit risk measurement and credit risk management techniques, particularly in the united states and some other industrialized countries. credit scoring, for example, is becoming more common among banks. some of the largest and most sophisticated banks have developed credit risk models for internal or customer use. asset securitization, widespread already in us capital markets, is growing markedly elsewhere and the same is true for the credit derivative markets. 4. against this background, market participants claim that the basle accord is no longer up - to - date and needs to be modified. as a general response, let me point out that the basle accord is not a static framework, but is being developed and improved continuously. the best example is, of course, the amendment of january 1996 to introduce capital charges for market risk, including the recognition of proprietary in - house models upon the industry ’ s request. the basle committee neither ignores market participants ’ comments on the accord, nor denies that there may be potential for improvement. more specifically, the committee is aware that the current treatment of credit risk needs to be revisited so as to modify and improve the accord, where necessary, in order to maintain its effectiveness. the same may be true for other risks. but let me first go into credit risk. objectives 5. before going on our way, we should have a clear idea of what our destination is. one of the objectives for this undertaking is, at least for supervisors, that the capital standards should preferably be resilient to changing needs over time. that is, ideally, they should require less frequent interpretation and adjustments than is the case with the present rules. equally desirable is that capital standards should accurately reflect the ( credit ) risks they insure against, without incurring a regulatory burden that would ultimately be unproductive. substantial differences between the risks underlying the regulatory capital requirements and the actual credit risks would entail the wrong incentives. these would stimulate banks to take on riskier loans within a certain risk category in pursuit of a higher return on regulatory capital. in order to obtain a better insight into these issues, banks ’ methods to determine and measure credit risk and their internal capital allocation techniques should be investigated. in doing so, however, we should not lose sight of the functions of capital requirements [ as discussed in the preceding session ]. 6. capital requirements foster the safety and soundness of banks by limiting leverage and by providing a buffer

financial conditions take longer to normalize. the bank judges that these risks are roughly balanced. against this background, the bank lowered its policy rate by 50 basis points on tuesday to 1 per cent, bringing the cumulative monetary policy easing to 350 basis points since december 2007. guided by canada's inflation - targeting framework, we will continue to monitor carefully economic and financial developments in judging to what extent further monetary stimulus will be required to achieve the 2 per cent target over the medium term. low, stable, and predictable inflation is the best contribution monetary policy can make to long - term economic growth and financial stability.