As you know, we have already spent close to three-quarters of a year studying both sets of issues in depth. Because both banks and securities firms have a great interest in the potential solutions to these particular issues, the Basel Committee has worked jointly with the International Organization of Securities Commissions (IOSCO) to consult with industry representatives and other supervisors on  2  BIS Review 17/2005  these matters. I must say that this co-operation with IOSCO in areas of mutual interest has been a very fruitful and beneficial experience, and the work has been conducted in a very positive and collaborative spirit. Also in this regard, I must extend my thanks to ISDA and its members for being faithful and active participants in these discussions. ISDA and its members have volunteered again considerable data, time, and energy to the work at hand. As you may already know, there are five specific areas of focus, namely First, the treatment of counterparty credit risk for over-the-counter derivatives, repo-style and securities financing transactions; Second, the treatment of double-default effects for hedged transactions, in relation with trading book, but also banking book, exposures; Third, the short-term maturity adjustment, under the internal ratings-based approach, for some trading book-related items; Fourth, a limited number of improvements to the current trading book regime, especially with respect to the treatment of specific risk; and Fifth, the design of a specific capital treatment for unsettled and failed transactions.
In particular, the activities and institutions which the Bank and the Authority will be expected to monitor will become more complex as the number of financial intermediaries with a presence both in Malta and in other countries, either directly through the establishment of branches or subsidiaries, or indirectly through the provision of cross-border services via the internet or otherwise, continues to grow in the light of the incorporation of EU passporting rights in Maltese legislation. The coming into effect of Basle II and, at the EU level, CAD III will be significant factors in this regard. At the same time, the tendency of companies to seek multiple listings in different securities markets means that interest rates and stock market valuations in one country will increasingly mirror those in other countries, even though the underlying economic fundamentals of that country might warrant some divergence in such variables. Indeed, as has been the experience of other countries, the trend towards consolidation and merger activity in the various segments of the market, from banking and the selling of insurance and investment funds to the provision of payment services and trading facilities, will lead to a situation where the institutions to be supervised will vastly exceed the financial resources and technical expertise available to supervisors and central banks.