Caruana, the Bank of Spain governor, has become the driving force in one of the most controversial regulatory efforts in decades, said he was prepared to intensify efforts to convince those affected of the accord's merits. “There is a unanimous understanding of the need for Basel II,” he said. “It is a completely new approach and in that sense you could say that it is a kind of revolution.” To the ramparts Caruana defended the accord, saying the U.S. decision to apply the new rules to only the top 10 banks - instead of all banks as Europe intends - met the spirit of the accord because U.S. banks already met high regulatory capital standards. “We respect their decision. We think this is perfectly compatible with Basel II. Europe has taken a different decision,” he said. Caruana rejected concerns that it could dry up some capital markets, as banks fear, as some market activities could be assigned a higher risk weighting under the new accord. “Frankly speaking, we don't think that this is a problem. The strategic decisions that banks have already taken are based on economic capital and the accord should not change this,” he said. Daniele Nouy, secretary general of the Basel Committee and Caruana's top assistant, said in the same interview that banks already assigned a cushion of economic capital to their different areas of activities, including market activities. The new accord should broadly follow existing practices. “We don't anticipate as many changes as people believe,” she told Reuters.
He knows market risk. He worked on the trading floor,” Lannoo said. Lannoo and the shadow committee are critics of the accord, saying its overly complex nature may in fact heighten systemic threats by “capturing” regulators who would be required to take a more active role in banks' daily operations. Revolution in the making The new accord, now over five years in the making, represents a revolution for the banks who will adopt it. It leaves the first accord's simple dictates behind and offers a menu ranging from basic to complex. A second Basel Committee member, who also requested anonymity, said he had few doubts that the technocrat Caruana was the right choice for the job due to his expertise in such a complex field. “This is not new territory for Jaime,” he said. Indeed, some critics of the accord say a technocrat like Caruana is just who is needed to make sure that the byzantine draft is moulded into shape before being finalised by the end of this year. Caruana, a 51-year-old Valencian, studied telecommunications engineering and then qualified as a government economist. Those who have worked with him say he is a real technology fan, which given his studies is no surprise. The current controversy over the Basel reform is probably a source of discomfort for Caruana, who keeps himself to himself. “He is very simple and discreet, and shys away from limelight,” says a former colleague.