Industry representatives had expressed the view that while many important advances had been achieved in the management and measurement of various risks arising from trading activities, neither the existing market risk capital rules nor Basel II went far enough in recognising them. We are now evaluating these views. Because the treatment of the trading book is of great interest to banks and to securities firms, we are collaborating with the International Organization of Securities Commissions (IOSCO) to clarify the Basel II rules and to find risk-sensitive capital treatments for certain trading book exposures that are compatible with Basel II. Just last month, for example, the joint working groups completed a survey of trading book exposures in banks and securities firms, focusing on three main topics. The first concerns the criteria that firms use to determine whether an exposure qualifies for inclusion in the trading book versus the banking book. The second deals with the practices banks and securities firms use to value and measure the risk of trading positions. The third part sheds light on the treatment of counterparty credit risk issues  4  BIS Review 66/2004  related to repo-style transactions, securities financings and unsettled trades and credit derivatives. Our working groups are currently evaluating responses to the surveys and will draw on the surveys to help inform their discussions on clarifications and guidance that the Basel Committee can offer to banks and supervisors regarding the treatment of the trading book.
I strongly believe that Europe is in a unique position to lead the way in the cross-border implementation of Basel II and to make faster and more tangible progress than is currently possible on  BIS Review 66/2004  5  a wider international basis. We need to seize this opportunity with both hands, because it will not just benefit us in the EU but, I believe, also have a positive impact beyond our borders. We have two major advantages in this respect. Firstly, within the European Union, we have a set of single market legislation in the banking field, founded on harmonisation and mutual recognition. Furthermore, the division of supervisory responsibilities between our countries is embedded in this common legal framework and has been in place for some time. Secondly, from a practical perspective, we also now have the Committee of European Banking Supervisors - CEBS. This committee is directly charged with promoting convergence of supervisory practices and co-operation between supervisory authorities, and has a key role to play in the implementation of Basel II in Europe. For these reasons, I believe that we can - and must - be more ambitious and go further than others may be able to go in our efforts to ensure consistent implementation of Basel II and effective supervision on a cross-border basis. We should not only move faster, but also go deeper in our search for convergence.