Such approaches were used for more than 80 per cent of the relevant banking assets at 1 January 2008. I would also like to point out that the impact of Basel II on credit institutions’ capital goes beyond the capital requirement calculation stipulated in Pillar 1 (even though it provides more comprehensive coverage than Basel I of new risks, such as securitisation activities). Regarding Pillar 2, the new regulations call for major additional arrangements to refine banks’ risk management and planning for capital cushions. This could lead to additional capital requirements, or other appropriate measures to enhance bank stability by considering risks that are not dealt with or are inadequately dealt with under Pillar 1. By the end of the year, this approach should lead to individual ratios for each institution that the Commission Bancaire sets on the basis of structured dialogue with each institution. BIS Review 82/2008  3  We have also undertaken a series of major actions that are directly in line with the general framework of the recommendations made by the Financial Stability Forum. Many spheres of action have been defined, but I would like to speak about three that I think are priorities, starting with transparency and valuation, followed by adapting the capital requirements set by Basel II for certain instruments, and finally, liquidity risk. First of all, enhancing transparency and financial disclosure was quickly identified as one of the key requirements for ending the crisis.
The materialisation of certain risks, the return of volatility on financial markets and uncertainty about the economic outlook have meant that major banks need to make a special effort in three key areas: i) maintaining adequate capital ratios to cushion them from further shocks, which may still occur, ii) strengthening their risk management systems and processes, and iii) pricing credit and liquidity risks appropriately. To explain these developments, I would like to speak to you briefly about the following points. 1. First of all, the French banking system provided proof of its resilience in the face of financial turmoil in 2007. 2. The current economic situation calls for vigilance nonetheless, since banks must be ready to cope with new risks that may occur at any time. 3. Finally, as crisis conditions persist, I should like to talk about the main thrusts of the supervisory authorities’ actions. 1. The French banking system provided proof of its resilience in the face of financial turmoil in 2007  After posting good performances since 2003, the French banking system was hit by the fall-out from the subprime crisis starting in mid 2007, as were the banking systems in the other leading developed countries. This led to an extended period of strong turbulence. The impact of the crisis on banks’ earnings first shows up in the third quarter financial statements and then more clearly in the fourth-quarter statements.