Following this process, the Commission bancaire will take a formal decision as to whether or not to authorise the institutions in question to adopt the advanced approaches of Basel II on 1 January 2008. For institutions with foreign entities, this authorisation is granted, where appropriate, following an exchange of information with the host supervisors, i.e. where the institutions’ subsidiaries are established. While many counties, such as France, have entered into the effective implementation phase of Basel II, the recent financial turmoil has once again drawn attention to this framework, leading some observers to call into question its overall rationale. This turmoil has new characteristics as it is a credit crisis in a market environment with particular implications concerning contagion channels. Risk transfer operations, in particular securitisation, and the interaction between funding liquidity and market liquidity risks have played new or at any rate greater roles than before. I am nevertheless convinced that the reform of the capital adequacy ratio rightly remains a crucial element in the regulatory response to the problems facing us today. I would now like to explain why I am convinced of this. 2. The current financial turmoil confirms the need to concretely implement Basel II. This turmoil may very legitimately raise questions about several of the major provisions of Basel II, such as the use of rating agencies or the internal approaches developed by banks to assess credit risk.
6  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  6  The new finance must be inclusive, allowing everyone to be better connected, better informed and more empowered. By adapting our hard and soft infrastructure, the Bank of England will help create the conditions for such innovation to flourish to promote the good of all the people of the United Kingdom. 7  All speeches are available online at www.bankofengland.co.uk/publications/Pages/speeches/default.aspx  7