Further institutional developments have since followed. Thus, without going into the details of the organisation of macroprudential regulation and supervision in the euro area, the member countries are moving ahead with the creation of national macroprudential authorities, while the ECB has been assigned responsibilities in European regulation. The institutional form of the national macroprudential authorities depends on the specific characteristics of each country, although, on the recommendations of the European Systemic Risk Board, their common feature has to be the major role played in one way or another by the central banks. Challenges for the banking sector posed by changes in international regulation and supervision Let me conclude by looking at the challenges for the banking sector derived from the major changes in banking regulation and supervision in the international sphere. I shall briefly describe the basic matters being discussed by the Financial Stability Board, or, as we all call it, the FSB. In November 2008, the G20 agreed on an ambitious “action plan” and asked the FSB to overhaul international financial regulation, a reform which was to go to the root of the crisis and pave the way for a sounder and safer financial system allowing sustainable financing of economic growth. The task has been both extensive and intensive. A substantial portion of the reforms needed to fulfil the mandate from the G20 have already been agreed, particularly with regard to the banking industry.
Details on our proposal can be found on the website of the Bank for International Settlements, and the Committee has invited public comment on the approach through the end of this year. In recommending this revision, the Committee seeks to ensure that risk management systems distinguish between losses that can be anticipated versus those that cannot. Moreover, the new framework would include explicit incentives for banks to address each kind of loss appropriately ensuring strong incentives for banks to provision properly against expected losses. Since the proposal would require only modest revisions to the text of CP3 and would not alter the underlying system and data requirements for banks wishing to adopt an advanced approach to credit risk, we expect that the revised treatment will conform closely to the work that banks have already completed to prepare for implementation. The work plan to improve the framework discussed during our last meeting identified several areas in addition to this important EL-UL issue. We think that this work plan is perfectly compatible with the original time schedule to implement the New Accord by yearend 2006. Other issues ahead: complexity Beyond the “EL/UL” issue, the Committee has put at the top of its work plan for the next few months several other credit-risk related issues that emerged in consultations. Of these matters, I’d especially like to highlight three, namely complexity, conservatism, and competition. Certainly, the complexity of the proposals continues to draw the public’s attention.