As banks enter new markets, create ever more complex products, and pursue customers near and far, the challenge for all of us is, first, to understand how our risk profiles are changing and, next, to find responsible ways to manage them. Whether they compete on a national, regional, or global level, banks have developed countless new tools and processes that promote their competitiveness, strengthen their returns, and control their exposures to credit, market, operational, and other risks. In turn, supervisors must review periodically the tools and processes at our disposal to ensure that our regulations and practices accommodate changes in market trends, the introduction of innovative products and services, and advances in the art of risk management. The current efforts to reform the international guidelines on capital adequacy represent a critical review of the cornerstone of bank supervision. The members of the Basel Committee have devoted substantial resources to this reform because we believe that, when banks are adequately capitalised and well managed, they become more stable and better able to withstand periods of financial distress. But more importantly, when all banks have the proper incentives to manage their risks appropriately and hold adequate levels of capital, we believe that the entire financial sector becomes more resilient, less sensitive to the ups and downs of the business cycles, and better able to serve as a source for the sustainable growth of the broader economy. That is our motivation for proposing the adoption of a New Basel Accord, which I will discuss this morning.
“Liquidity Regulation.” November 20, 2014, speech at the Clearing House 2014 Annual Conference, New York. Tucker, Paul, (2016). “The Political Economy of Central Bank Balance Sheet Management.” May 5, 2016, prepared for a workshop jointly sponsored by Columbia University’s School of International and Public Affairs and the Federal Reserve Bank of New York, New York. 23  See Tucker (2016) for a consideration of these issues. BIS central bankers’ speeches  7  8  BIS central bankers’ speeches  BIS central bankers’ speeches  9  10  BIS central bankers’ speeches  BIS central bankers’ speeches  11