By improving the quality of banks’ public reporting of their risks and the measures they take to control them, we intend to strengthen the ability of other market participants to understand a bank’s risk profile. When investors, customers, and even other banks have access to better information on how well a bank is managing its risks, they are better able to make business and investing decisions relevant to that bank, which can create a powerful incentive for bank management to improve their handling of those risks. Together, the three pillars of minimum requirements, supervisory review, and market discipline are intended to ensure that banks understand their risks and take adequate precautions to protect themselves against those risks through their control structures and their holdings of capital. But most importantly, banks will have incentives to find better ways to identify, measure, and manage their exposures. Current status of New Accord This past summer, we concluded our third round of public consultations on the proposals, and I’d like now to give you a sense of the current status of the New Accord, which is the second topic I will address today. By now you may have read that the Basel Committee reached an agreement last month to address the final issues raised in public consultations over the summer and to complete the new rules by mid-year 2004. This was no easy task, as the Committee received over 200 comment letters on the Third Consultative Paper, or “CP3”.
There is some similarity with what the G20 has been aiming at with its “Framework for growth”, a process through which countries identify shared objectives, the policies needed to reach them, and the progress toward them … although we can obviously be more ambitious for the euro area. •  In a decision phase, the euro area Finance Minister would propose a strategy, consisting of the collective objective and – as far as necessary – its country specific translations in terms of reforms and policy stance. This proposal would be subject to formal opinions from the Fiscal and Competitiveness Councils. It would then have to be adopted at simple majority by the Eurogroup, and further to be endorsed by the European Parliament. In case of a stalemate, it would be for Heads of States and Governments – the European Council in a euro format – to adopt the collective strategy, on the basis of an adapted proposal by the EA Finance Minister. We should of course bear in mind the rationale for subsidiarity. Euro area outcomes will remain dependent on national policies. Many areas of policy-making and all implementation will remain decentralised. Yet full coordination will require that economic policy stance and spillovers be collectively agreed upon, and that Member states work consistently to achieve the common objectives. 6  BIS central bankers’ speeches  B. Which tasks for a euro area Finance Minister? First, the Minister would be in charge of preparing the euro area-wide collective strategy to fulfill the mandate I already described.