However, it is important that given the questions that have been raised about certain aspects of Basel II in the contest of the sub-prime crisis and the moral hazard of self assessment, that the architects of Basel II revisit some of the major tenets of the new proposed regulatory framework, especially the advanced approach.
These factors have different lifespans, as it were, with some representing more of a temporary phenomenon and others having a more medium-term impact. While the current economic situation justifies an expansionary monetary policy stance in the euro area, it is also appropriate, in my view, that the Governing Council, at its last policy meetings, refrained from loosening it any further.