Nevertheless, there still remain a number of challenges for banks and financial supervisory authorities with regard to internal models. For instance, the calculation of a bank's risk-weighted assets may mean that several thousand parameters must be calculated. Therefore, it is almost unnecessary to point out that the complexity of the calculations of the banks’ capital requirement can be considerable. It is then natural that some form of safety net is needed, to ensure the banks’ risk weights do not fall too low. ...and a floor for risk-weighted assets will be introduced The Basel Committee has therefore discussed introducing a new floor for riskweighted assets that prevents them from falling too low. The Basel II Accord contained this type of floor, but it has been implemented in different ways in different countries and now needs to be revised. The new floor will in practice mean that no bank is allowed to have risk-weighted assets below a percentage of what they would have been if the Basel Committee's standardised methods had been used. Within the scope of these standardised methods, the banks are not given the opportunity to use internal models to determine risk weights. These standardised methods are currently used by smaller banks that do not use internal models. There are several other reasons for this proposal as well. In addition to the fact that a floor would contribute to increased transparency it will make it easier to compare banks’ capital levels over time. This will enhance confidence in bank’s capital ratios.
With regard to real GDP growth, it appears that the recovery in the euro area has continued into 2004, following quarter-on-quarter growth rates of 0.3-0.4% in the second half of 2003. Recently released data on production and demand as well as confidence indicators have been mixed, implying some short-term uncertainty, while preliminary information available after the tragic events in Madrid on 11 March does not suggest a major impact on confidence. We will continue to monitor the situation closely. On balance, there is currently no evidence challenging the assessment of continued, though modest, real GDP growth in the euro area over the short term. More fundamentally, the conditions remain in place for the recovery to continue in 2004 and to strengthen over time. First, global economic growth is robust and broadly based, both geographically and across sectors, thereby providing a positive external environment for the euro area. In this context, we expect euro area exports to grow significantly this year and next, despite some past losses in price competitiveness. Second, on the domestic side, investment should be helped by favourable financing conditions, an improvement in corporate earnings and spillover effects from global demand trends. Some signs of an improvement in fixed capital investment are already discernible in the Eurostat data for the fourth quarter of last year. As regards private consumption, growth in real disposable income should lead to increased spending, in particular because there are no financial constraints for households which would pose obstacles to higher expenditure.