As regards Basel II, June 2004 saw the publication of the final text of “A Revised Framework of the International Convergence of Capital Measurement and Capital Standards”. The most notable new developments are that it allows institutions to use internal risk measurement methodologies if they meet certain minimum requirements and are accepted by the supervisor. The possibility of using the most advanced methodologies will depend on the development of risk management systems, on the effective integration of these systems into management, on the adaptation of the technological environment and on the availability of consistent and integrated historical information databases. BIS Review 45/2005  11  Although the Accord will not enter into force until 2007, work has commenced on the long and complicated task of development, implementation, internal validation by institutions and review by the Banco de España of these methodologies, at speeds which will inevitably differ depending on the preparedness of the institutions. Furthermore, the European Parliament is debating a directive to legally implement Basel II after appropriately adapting it to the specific features of EU institutions and markets. It is difficult to state, in a nutshell, what the new Accord will signify. Perhaps most noteworthy are the three core ideas on which the three pillars rest: a recognition in regulation of sound practices in risk management, along with an incentive to encourage them; a strengthening of the supervisor’s judgement, as an added factor of safety; and the importance of market discipline, i.e.
In this way, they will contribute not only to the stable functioning of the institutions for which they are responsible, but also to that of the financial system as a whole. The inclusion as from last year of a chapter dealing with management aspects of the Banco de España allows me to be brief and to point out that in 2004 the branch restructuring plans, the staff renewal and redimensioning plan and the early retirement plan were completed and the negotiation of the 2002-04 collective bargaining agreement was finalised. All these reforms, which enable us to undertake appropriately our important mission and functions in the euro area, have been made possible by the effort and dedication of all the Bank’s staff, whom I thank for their attitude and their work. Finally, I express my gratitude to all the members of this Council for their inestimable support and collaboration. I would like to conclude by remembering two people whose untimely loss we suffered last year: Ángel Pardillos, who was one of the victims of the 11 March attacks, and Eugenio Domingo, who shared, at this table, many sessions of this Council, both before and after his term of office at the European Central Bank. Thank you. BIS Review 45/2005  13