The second key question is whether Basel II is even appropriate for banking systems in emerging markets, which I would like to address now. In my view, the principles and vision of supervision in Basel II are valuable for supervisors and banks in all markets. I must acknowledge that its advanced approaches to risk measurement are mainly intended for those internationally active banks that have the greatest potential to increase systemic risk, and are very demanding in terms of the investments that they pre-suppose in the banks’ own systems, and the qualitative requirements that they set. The 1988 Accord itself was created initially to apply a more consistent set of rules to globally competitive banks, and the shortcomings of the existing rules today are especially evident in the context of these highly sophisticated organisations. However, many supervisors apply the 1988 Accord to less complex organisations that may be active mainly or even only in domestic markets. Is Basel II appropriate for those banks as well? I think that the great level of diversity in markets and in financial systems worldwide makes it difficult – and perhaps even counterproductive – to try to specify a single rule that could be applied to all banks in all countries. Fortunately, Basel II is moving away from a “one-size-fits-all” rule. In fact, Basel II’s menu approach provides supervisors and banks with a range of options that make its basic standards more readily available to many kinds of organisations in countries that face different economic circumstances.
If we want to preserve the present global expansion, if we want to encourage reforms and hence increase potential growth, we need to maintain an open international environment, a rule-based multilateral order. [slide 16] I stress it here in the United States, as a dedicated European speaking to close historical allies: we have many common challenges, politically and economically. To avoid disaster, we should resolutely build common solutions. Believe me: France is taking its part of the task, today more than ever. 4/4  BIS central bankers' speeches