Also from a European perspective, I believe that the EU should seek to implement the trading book changes at the same time as other major countries. Moving now to the second initiative, the Basel Committee has long intended to conduct work to re-confirm that the new framework meets our objective to broadly maintain the aggregate level of capital requirements, while keeping incentives to adopt the more advanced approaches that are offered. In order to establish a common data set on which to base this review, the Committee has decided to begin a recalibration exercise in autumn this year, some months earlier than anticipated. As I said earlier, I don’t believe that this will imply a significant change to the framework. We are already satisfied that the new capital framework clearly differentiates the degree of risk in particular transactions on a relative basis. What we need to confirm is that the absolute requirements are right and that the appropriate incentive structure is maintained. 5. Conclusion  In my testimony today, I have sought to outline the reasons why Basel II matters so much and how it will support the continued safety and soundness of the banking system. When we motivate banks to improve their understanding and approaches to risk, I believe that banks will become less sensitive to the ups and downs of the business cycle, better able to weather periods of distress and better able to serve as a source of credit and growth to the economy.
It will help to avoid redundant and unco-ordinated approval and validation work, thereby reducing the implementation burden on banks, and conserving supervisory resources. In this regard, the Committee’s Accord Implementation Group continues to encourage practical work among supervisors on applying Basel II effectively and efficiently to internationally active banking organisations. The AIG is currently working with supervisors of different areas of the world to conduct a number of “real case” studies to gain better insight into the practicalities of co-operation between home and host supervisors. In this context, if you will permit me, I would like to speak from my perspective as a European banking supervisor, and pick up on the statement I made at the beginning of my intervention. As I said, I believe that Europe is in a unique position to lead the way in the cross-border implementation of the  BIS Review 3/2005  3  new framework and to make faster and more tangible progress than is currently possible on a wider international basis. I think we need to seize this opportunity with both hands, because it will not just benefit us in the EU, contributing to the fulfilment of the Lisbon objectives, but, I believe, will also have a positive impact beyond our borders. We have two major advantages in this respect. Firstly, the division of supervisory responsibilities between our countries is embedded in our common single market legislation in the banking field, founded on harmonisation and mutual recognition.