This is all the more important in the context of the “originate and distribute” model given that the effectiveness of the risk transfer instruments on the basis of which the latter has developed requires sufficient liquidity both on the part of agents and markets. It is, incidentally, worth noting that the Committee of European Banking Supervisors (CEBS) and the Basel Committee are working on a revision of the current regulations regarding liquidity. Moreover, concerning risks incurred by some activities such as asset management, it appears necessary to gain a better insight into the transmission channels of these risks between activities carried out for banks’ own account and for third parties as well as the liquidity requirements generated by the latter. More generally, the methods used to assess and capture some risks such as reputational risk and strategic risk, notably in the context of Pillar 2, need to be developed. I would like to stress the very important role that Pillar 2 must play in improving banks’ management practices i) regarding new risks not covered by Pillar 1 and ii) in areas that supervisors deem, specifically, liable to become new sources of vulnerability. In practice, for some activities, there are still no universally accepted standards for risk management. This does not mean, however, that banks’ risk management  BIS Review 11/2008  5  processes in these activities are always sufficiently stringent, but rather that there is a wide range of instruments available for this purpose, each with its advantages and disadvantages.
The latest study by the FSI on the application of Basel II, published in September 2006 and conducted among 115 countries, shows that 82 Non-Basel Committee Member Countries intend to implement the new framework, in most cases as of 2008 or 2009, and in some cases at a later date. Fully aware of the practical aspects of implementing a more modern, complete and risk-sensitive prudential framework, the Basel Committee published, in July 2004, i.e. directly in the wake of the New Capital Accord, a document entitled “Implementation of Basel II: practical considerations”. Recognising that the adoption and application of Basel II may not be a short-term priority for a certain number of supervisory authorities of non-G10 Countries, the Committee encouraged the latter to develop their own approaches and implementation timetables. Given that the necessary legislative and regulatory changes and human resource requirements have to be identified, the application of Basel II will necessarily be a gradual process throughout the world. This is especially the case since technical decisions often have to be taken on the exact choice regarding the scope of application of Basel II or the possibility of a staggered implementation of the three pillars. In this respect, I welcome the choice made by Algeria to adopt and implement Basel II in the near future. This choice should not be seen by banks as a regulatory constraint but rather as a great opportunity to converge towards best international practices.