Let me give two examples of what is being done: •  As regard prudential supervision, I would only mention the fantastic work which has been achieved by the Basel Committee under the leadership of Bill McDonough, the President of the Federal Reserve Bank of New York, in the field of banking supervision. I trust that the new accord will permit a better and more appropriate handling of this extremely important domain as regards financial stability. I am also happy that the concept of “dynamic provisioning”, which is anticyclical by nature, has been recognised by the Basel Committee as a useful concept. •  As regards accounting standards, it seems to me that we should also inject in the present meditations in the US, in Europe and at a global level the concern for financial stability. Let us beware of changes that would increase the procyclicality of accounting rules. Let us favour changes that would simultaneously help fair accounting and diminish procyclicality. In that regard, it seems important to me to design accounting practices which would try to take into account of the time horizon of institutions and market participants. Otherwise, we would take the risk of driving all financial institutions and market participants to shorten their time horizon down to a day-to-day basis. This could be a recipe to favour inappropriate market functioning and foster herd instinct in time of excessive volatility. 2.
Cases of financial turmoil in emerging countries, which are usually due primarily to inappropriate domestic policies, show that there is room for improving the timely identification and correction of vulnerabilities by International Financial Institutions. In particular, a key point is to improve the analysis of debt sustainability in order to have a more forward-looking assessment of possible cases of insolvency. We can only praise the ongoing work by the IMF on this matter. Unfortunately, enhancing warning signals will probably not be sufficient to protect us against financial crisis. 2.2. Designing effective procedures for handling international financial crisis represents another challenge  First, there is a need for clarifying the financing policy of the IMF, as acknowledged by the G 7 and the recent IMFC communique. Greater discipline in the provision of official finance is key to ensure a more timely involvement of the private sector in crisis resolution (PSI), and to provide strong incentives for debtors and creditors to start debt negotiations timely and appropriately. By doing so, the international community will benefit from the so-called « catalytic approach », that was at the core of crisis management in the 1980s and proved quite successful, and that was recently restated by the international community. A precondition for an orderly crisis management relies upon more predictable decision-making process regarding the use of Fund’s resources. In that regard, the presumption of clear access limits to Fund financing is key.