I have mentioned four prudent principles, plus another four more forward-looking ones. Some may emphasise the former, while others may prefer to move faster. My own view is that there is some urgency in moving forward significantly. Building the European framework So let us now focus on the concrete steps that move in this direction. I would like to separate these into two categories: those that relate to the regulatory framework and those that pertain to the supervisory framework. The regulatory framework Let me begin with some reflections on the regulatory framework. Going back to the principles I highlighted earlier, I believe we should build upon the regulatory framework that already exists in the EU. Any improvement to the EU framework for financial supervision should first seek to fully exploit the potential of the existing framework. In this respect, the concepts and responsibilities of home and host supervisors and the framework for consolidated supervision are well-embedded in the existing banking directives, and it makes a lot of sense for them to form the basis of the future approaches. Indeed, the directive to implement Basel II in the EU – the so-called capital requirements directive – contains key provisions which will reinforce the role of the consolidated supervisor in relation to applications to use the advanced approaches of the new capital framework.
It is essential that the industry keeps considering the issues and expressing its ideas, but I am afraid that unrealistic expectations can only lead us to an agonised debate which could polarise views and even hinder the progress that we need to make now in the crucial and urgent work of implementing Basel II, and international accounting standards. As I mentioned earlier, these were the more prudent principles that I wanted to mention. But, as the 19th century English writer Charles Caleb Colton said, “there is nothing more imprudent than excessive prudence”. Therefore, let me add a further four principles that go more in a more progressive direction. Firstly, I think that the EU needs to be ambitious, and set an example. I am convinced, and have said in many of my recent interventions, that the EU can and should go further, deeper and faster than the wider international community in finding greater consistency, convergence and efficiency in banking supervision. We should especially take advantage of the opportunities presented by Basel II and the fact that we already have a body of single market legislation and a long history of supervisory cooperation on which to build. And if we can demonstrate that progress is possible among 25 countries that are still rather diverse, others will have more confidence to push ahead also. Secondly, we should recognise the legitimate concerns of the industry. More efficient supervision is a necessary - although not sufficient - condition for a more integrated market.