The MA and the risk margin between them are key determinants of the balance sheet valuation of most life insurance liabilities. Both play an important role, and there are independent cases for the reform of both. We have set out our main concerns with the existing MA framework, including in the recent discussion paper (DP) we published alongside HM Treasury’s Consultation Document [7]. These can be broadly summarised as  Page 5  1. the fundamental spread (FS) does not capture all retained risks and is generally low, 2. the FS is not sensitive to differences in risks between assets and 3. the FS does not adjust to shifts in the credit environment unless a default or downgrade has occurred. We have also expressed concern regarding the size of the risk margin, and its sensitivity to low interest rates. However, given the interaction between the MA and the risk margin on balance sheets, we cannot look at potential reforms in isolation. In order to maintain transfer values in line with observed prices, the calibration of changes have to be considered as a package. Undertaken in isolation, a large cut to the risk margin would fail this simple test, and would increase the risk that an insurer’s liabilities could not be transferred to a third party if it were to fail. This would expose policyholders to an unacceptable risk and would be incompatible with the fundamental principles behind the Solvency II regime.
BIS central bankers’ speeches  1  We all agree that the Black Sea Region is increasingly becoming a priority on the international agenda. In fact, a regional approach is emerging as actors completely understand that common problems need to be addressed jointly. Over the past five years the region and the world have faced many troubled moments; fast changes have influenced the way peoples choose to look to the future. The idea of strengthening cooperation in the Black Sea Region is not new. It sprang from a paradox: although the countries in the area shared geographical proximity, they came from different historical and political backgrounds and, as a consequence, had poor or quasiinexistent economic relations. As a veteran in this field, I can give you a simple example: in the ‘90s, to reach either Baku or Tbilisi one had to fly through Vienna. In effect, in the autumn of 1997, the Governor of the Central Bank of Turkey contacted me and suggested the founding of a Governors' Club of Central Asia and Black Sea Region, with the Bank for International Settlements serving as a model. It was officially instituted on May 1st, 1998, in Istanbul, when nine countries signed the founding protocol. During the following years, thirteen more countries gradually joined our Club, now spreading from the Baltic Sea to the Pacific Ocean, from Central Asia to the centre of Europe.