Throughout 2011, the ACP actively participated in the preparation of the transposition of the “Basel III” agreements into European law which is due to be adopted in mid-2012 and in the negotiations preparing the entry into force of “Solvency II”. At national level, the preparation of banks for the new “Basel 2.5” and “Basel III” regulations was one of the priorities of the on-site inspections and of the teams responsible for preparing authorisations for the use of internal models notably for market risk. In 2012, the ACP will continue with its work helping the market to adjust to the new regulatory frameworks, notably by putting in place, in coordination with the supervised institutions, the new procedures for prudential reporting. With regard to banks, I also see a number of areas where decisive progress is expected in 2012.
Andrew G Haldane: Why banks failed the stress test Speech by Mr Andrew G Haldane, Executive Director, Financial Stability, Bank of England, at the Marcus-Evans Conference on Stress-Testing, London, 9-10 February 2009. I would like to thank Geoff Coppins, Harry Goodacre, Nigel Jenkinson, Salina Ladha, Iman van Leyveld, Jack McKeown, Joe Noss, Adrian Penalver, Nick Vause and Matthew Willison for contributions and comments. *  *  *  By any historical standard, the financial crisis of the past 18 months has been extraordinary. Some have suggested it is the worst since the early 1970s; others, the worst since the Great Depression; others still, the worst in human history. Time will tell. Risk managers are of course known for their pessimistic streak. Back in August 2007, the Chief Financial Officer of Goldman Sachs, David Viniar, commented to the Financial Times: “We are seeing things that were 25-standard deviation moves, several days in a row” To provide some context, assuming a normal distribution, a 7.26-sigma daily loss would be expected to occur once every 13.7 billion or so years. That is roughly the estimated age of the universe. A 25-sigma event would be expected to occur once every 6 x 10124 lives of the universe. That is quite a lot of human histories. When I tried to calculate the probability of a 25-sigma event occurring on several successive days, the lights visibly dimmed over London and, in a scene reminiscent of that Little Britain sketch, the computer said “No”.