Overview In my remarks today, I’d like to share with you the latest news on the status of our work. We continue to move forward on the basis of our commitment last October to finalise outstanding issues by mid-year and have made significant progress in a number of important areas. As I will discuss in more detail today, by calibrating regulatory capital to unexpected losses only, we found a better solution which will make regulatory capital requirements for credit losses more consistent with bank’s own economic capital models. We have made significant progress in securitisation, credit risk mitigation and operational risk. We have clarified Pillar 2, and we continue to make progress in the implementation of the Accord. After sharing this news with you on our progress to date, I’ll conclude with thoughts on the work ahead in the final months. BIS Review 12/2004  1  Common factor But first let me begin with a reminder of a goal that is a common factor in all our work: namely, the objective to recognise good risk management practices and to create additional incentives to further advance the discipline of risk management. This is possibly the most important and powerful channel of the New Accord for fostering financial stability in the medium and long run. And it builds on the widespread acceptance of the existing 1988 Basel Accord while addressing its key weakness.
Other concerns could include the burdens and deadweight losses associated with reserve requirements, the implications of the framework for the efficiency and resilience of money markets and government securities markets, and the framework’s ability to help support the efficiency and resilience of payment systems. 20  For example, a large supply of “money-like” assets provided by the official sector could crowd out some shortterm private sector liabilities, reducing the amount of maturity transformation in the financial system and improving financial stability. See, for example, Mark Carlson, Burcu Duygan-Bump, Fabio Natalucci, William R. Nelson, Marcelo Ochoa, Jeremy Stein, and Skander Van den Heuvel, “The Demand for Short-Term, Safe Assets and Financial Stability: Some Evidence and Implications for Central Bank Policies,” Board of Governors of the Federal Reserve System Finance and Economics Discussion Series, no. 2014–102, November 2014. 21  Maintaining a large balance sheet in normal times may be perceived as a “slack” variable that invites policymakers to use it for non-monetary policy objectives. See, for example, https://www.philadelphiafed.org/ publications/speeches/plosser/2010/09–24–10_swiss-national-bank. 22  For a discussion of footprint considerations in the design of the Federal Reserve’s overnight reverse repo operations, see Joshua Frost, Lorie Logan, Antoine Martin, Patrick McCabe, Fabio Natalucci, and Julie Remache, “Overnight RRP Operations as a Monetary Policy Tool: Some Design Considerations,” Federal Reserve Bank of New York Staff Reports, no. 712, February 2015.