Undoubtedly, it would require commitment of substantial capital and human resources on the part of banks and the supervisors. For banks, the main challenges appear to be the skills shortages and data inadequacies coupled with uncertainties regarding costs associated with implementation. Banks all over the world have started to voice concerns over the mounting regulatory costs. It is a regulatory responsibility to encourage banks to have a phased implementation programme starting from a traditional baseline scenario of identification of operational risks, assessment, and awareness monitoring and integrating these elements over a period. Basle II implementation and operational risk mitigation process puts heavy burden on supervisors to detect problems in banks, to stay on top of the latest advances in risk management and to avoid abuses of many powers that are given to supervisors. All these are too much for supervisors to bear as many of us are still on the learning curve. Exchange of information both within and outside the region would be very important particularly in capacity building for evaluation and validation of risk assessment models of banks. This seminar is one such joint effort by the Central Bank of Sri Lanka  BIS Review 88/2005  3  and the SEACEN Centre, which would provide a good opportunity to exchange information and learn from each other. 16. Basel II is expected to foster financial stability through its risk sensitive framework through encouragement of banks to adopt improved risk management practices.
The HKMA has now decided that Participating AIs can include two more types of RMB assets, namely “RMB sovereign bonds issued in Hong Kong by the Ministry of Finance of China” and “RMB bond investment through the Mainland interbank bond market”, in the calculation of this limit. The above two relaxations take effect today. I believe they will help expand the scope of development for offshore RMB business in Hong Kong and provide banks with a greater flexibility in RMB asset management, which will be conducive to further development of the market. Third, the HKMA has imposed some restrictive arrangements on the inclusion of RMB assets as liquid assets in calculating the statutory liquidity ratio of AIs. As the offshore RMB market in Hong Kong becomes more mature, I believe there is room for suitably relaxing these restrictions. Since the adjustments to be made in the calculation are more complicated and technical, we shall announce the details later. BIS central bankers’ speeches  1