nout wellink : goals and strategies of the basel committee remarks by dr nout wellink, president of the netherlands bank and chairman of the basel committee on banking supervision, at the high level meeting on the implementation of basel ii in asia and other regional supervisory priorities, hong kong, 11 december 2006. * i. * * introduction thank you very much for the opportunity to address this important meeting on the implementation of basel ii in asia and other regional supervisory priorities. i would like to thank the hong kong monetary authority for hosting this event, and congratulate the fsi and emeap on putting together such an impressive conference program. hong kong is a dynamic city in this rapidly growing region, so i can think of no better place to discuss the changes that are taking place in banking and supervision. what i would like to do this morning is talk briefly about the goals of the basel committee, outline the strategy and work program the committee has in place to achieve those goals, and then provide some concluding thoughts. ii. goals of the committee as the new chairman of the basel committee, i think it is appropriate at this time for me to step back and consider the broad goals and strategies of the committee. i would like to start by sharing with you today the committee ’ s objectives as i see them. in my view, the committee has three broad objectives. one, to provide a forum for dialogue and information exchange among supervisors. two, to promote improvements in bank risk management practices and the framework for banking supervision. and three, to promote mechanisms for pragmatic implementation of the principles developed by the committee. turning to the first objective, a core goal of the committee has always been to provide a forum for dialogue and information exchange. this helps to promote supervisory co - operation, greater consistency, and a level playing field for an increasingly global banking industry. information sharing and dialogue also has a much broader aim, however. that is to provide the committee with the context and perspective needed to develop policies and practices that most effectively promote a robust banking and financial system. the second objective of the committee is perhaps most visible to the broader community. with the insight gained from information sharing about developments in risk management, supervision and financial markets, the committee promotes improvements in these areas. in this regard, the committee seeks to develop and promote proportionate responses to the issues identified using a range of tools. this may include undertaking further fundamental research, preparing range - of - practice papers, or where necessary developing new policies

will have real economy implications. in addition, the interest rate benchmarks that monetary policy sets will directly impact the cost of leverage and the volume of credit exposures. obviously, the use of one policy lever ( in this case, policy interest rates ) would not always be able to address – at the same time – two policy objectives ( price stability vs. financial stability ) without conflict. hence, the use of enhanced policy tool kit and policy coordination are imperative. to operationalize all these at the bsp, we have recently created the bsp financial stability committee ( or fscomm ) in addition to the bsp advisory committee ( which recommends monetary policy to the monetary board ). from the five items i enumerated earlier, it is clear that financial stability crosses the three pillars of central banking. to close that “ divide ”, the fscomm is set at the highest level at the bsp, with the main committee manned by the three deputy governors and 3 of the most senior officers of the bsp … i have the pleasure of directly overseeing this committee. closing remarks : market conduct ensures reform success i have given you some of the guideposts, or mile markers on the road to financial stability – as we see it in the bsp. the bsp can put out regulations and create the enabling regulatory environment … but, after everything is said and done, it is the market that will execute transactions. a wise man once warned that when dealing with the market, one should anticipate that it is not so much about the destination, as it is about the ride itself. financial targets tell us where we want to go but it is risk - taking and risk management that get us there. no doubt, the ride can be enjoyable and give you a high, but if you don ’ t manage the risks well, then you – dragging everyone else with you – might end up in one big traffic jam, if not in the gutter. ladies and gentlemen, i am not about to ask everyone here – for lack of a better term – to “ behave ” … as michael corleone said to sonny, “ it ’ s not personal, it ’ s strictly business. ” acceptable behaviour is a given because that is what collective responsibility requires. and our collective responsibility are prudential concerns. turned on its head, prudential concerns are our collective responsibility because the gains ( as well as the losses ) are always shared. this applies as much to the cash market,