Creating greater simplicity and comparability in the regulatory framework A vigorous public debate has developed recently as to whether the Basel regulatory framework strikes an appropriate balance among different desirable characteristics: simplicity, comparability and risk sensitivity. The policy development process must take these and several other – often competing – factors into account, and finding the right balance often involves a difficult set of trade-offs. Nevertheless, it is important to keep this issue under review, and so the Committee established a high-level task force last year with a view to looking at this concern from a broader, strategic perspective. The Committee has already had some discussions on the task force’s findings, and will have more in the coming months (including at our meeting that begins tomorrow). The way forward will also be guided by the findings of the reviews of riskweighted assets that I mentioned earlier, since at the heart of that work is a concern about comparability. It is too early to say how we will take this work forward. Some issues, such as those in relation to market risk modelling, can be taken up via our existing trading book review. Others might require tweaks to the framework, or supervisory guidance, which can be implemented in the near term. And others might necessitate a deeper, longer-term review before we can decide on any solution. We will publish a discussion paper in the coming months that deals with discusses some of the complex trade-offs that need to be made.
Before I discuss what’s left to do, let me recap what has been done over the past year. The key initiatives completed by the Committee in the past year include: •  reaching agreement on a package of revisions to finalise Basel III’s Liquidity Coverage Ratio (LCR);  •  revising the Core Principles for Effective Banking Supervision;  •  developing a policy framework for dealing with domestic systemically important banks;  •  establishing disclosure requirements for the new Basel III definition of capital; and  •  updating the supervisory guidance for assessing the effectiveness of a bank’s internal audit function. In addition, the Committee established a sound operating framework within which to assess its members’ implementation of Basel III. As a result, the Committee produced: •  two regular semiannual reports on Basel III implementation in all member countries (along with two special reports to the G20 on implementation);  •  assessments of Basel III implementation in the European Union, Japan and the United States; and  •  a report analysing the variability of risk-weighted asset calculations for market risk in individual banks. Further down the agenda, my colleagues from the Basel Committee Secretariat will provide additional insights on our implementation work. I would like to make the point now, however, that these efforts are critical to delivering on the benefits that Basel III offers. Rules written have no effect if not implemented: we cannot fail on this front, and I will say more about our efforts shortly.