In addition, through the supervisory process, we will continue to look for weaknesses in our supervised institutions that expose them to potential fraud. While the Bank of Thailand is here to support institutions in this manner, please keep in mind that the primary responsibility for fraud prevention remains with the board of directors and management. I would be remiss in not addressing the upcoming launch of the revised Basel Capital Accord. Basel II, as it is more commonly known, establishes expectations for financial institutions’ risk management processes. In addition to requiring an explicit calculation of capital requirements for credit and operational risk, Basel II requires institutions to have robust consolidated risk management processes. Institutions are expected to ensure that they have adequate capital for all other risks as well. Through the supervisory process, regulators may also require additional capital for institutions whose risk management processes are not fully compliant. Institutions can best address the expectations of Basel II by maintaining or establishing sound risk management processes. In Thailand, the implementation of Basel II will start at the end of this year, and the preparation for its implementation is progressing on schedule. As our institutions complete  2  BIS Review 52/2008  the implementation of Basel II, I firmly believe that we will see a commensurate improvement in the quality of risk management among our banks, particularly in the operational risk area.
Miguel Fernández Ordóñez: Weiß und Rot – the cycle, central bankers and supervisors Address by Mr Miguel Fernández Ordóñez, Governor of the Bank of Spain, at the “World Currency Regime – to Float or not to Float” session, 18th Frankfurt European Banking Congress, Frankfurt am Main, 20 November 2008. *  *  *  Let me begin by thanking the organisers of this edition of the Annual European Banking Congress for the opportunity to address such a distinguished audience on the subject of the cycle, central bankers and supervisors. I will be talking about “Weiβ und Rot” and not exactly about wines. *** Numerous factors have played an important role in triggering the current crisis: the subprime mortgages, the highly complex securitisation structures, the originate-to-distribute model, the over-reliance on rating agencies, risk valuation models that few could understand, etc. Many of these mistakes have been identified over the past 15 months by the authorities and by financial institutions themselves. Some regulatory reforms are already under way in the EU and overseas, while the financial entities themselves are reviewing their risk management. We can be sure that the next crisis will not be like the current one. But it is naive to believe there will be no further expansions and slowdowns. For 5,000 years now, since the Pharaoh asked Joseph about the meaning of a dream in which he saw seven fat and seven lean cows, we have known that the economy is unequivocally cyclical.