At the same time, supervisors will benefit from easier exchange of information. And the framework offers the flexibility to incorporate future modifications with lower costs. Overall, these positive effects should lead to higher quality in the information flows generated. I should say at this point that neither of these projects has been easy. If you consider that the European Union is currently made up of 25 countries, you can well imagine that the starting situation was complex, with each country requiring its banks to submit different information. In fact, the differences were not limited to the definitions used by each Member State, but also related to the reporting systems, and the technologies and formats used. But I would argue that it has been a very worthwhile initiative, and one that will reap benefits for years to come. 3  Increased reliance on business information  Let me turn now to the third element that I believe is important for success. I believe that regulators should put increased reliance on information generated and used by institutions within their own business. Let me set the context for this remark. I don’t think it is an exaggeration to say that, over recent years, the Basel II initiative has driven a paradigm shift in regulatory attitudes. Regulation used to be something that was rather imposed on institutions “to be complied with”, and seen by them as completely separate from their own internal business processes, and therefore an additional cost.
In my view, a greater degree of convergence in the underlying regulation which applies to financial institutions and markets will provide us with an excellent basis for making progress on other aspects. Let me refer to some initiatives that have been taken in this respect. Of course, the first initiative that I must mention is that of International Financial Reporting Standards (IFRS). Given the importance of accounting data as the basis of information flows, the development and application of these standards is providing a valuable opportunity to enhance the efficiency and comparability of information, especially on an international basis. Indeed, with effect from 1 January 2005, all EU listed companies have been required by law to use IFRS for their consolidated financial statements. The significance of this development should not be underestimated. It means that market participants and other interested parties should be able to compare and contrast information relating to companies in different jurisdictions on a like-for-like basis, and thereby make more informed decisions. Common accounting standards increase transparency and comparability for investors, thus promoting greater cross border investment. And let me give you a less direct, but nonetheless important example of a regulatory convergence initiative, from my perspective as Chairman of the Basel Committee on Banking Supervision. As you may well be aware, at the end of the nineties, we embarked on a review of the so-called “Basel Accord”, an agreement reached back in 1988 to determine minimum regulatory capital requirements for international banks.