We started to work in all major institutions

Your work of validating internal models in banks started a year ago. At this point, are you in time

Work requested more time than expected and some institutions had been perhaps a little optimistic. Hence, he could have, from time to time, some delays. But the calendar knows no lag for several months and our plan to walk now runs without problem. We started to work in all major institutions. 32 Missions of validation to complete by May 31, 2007, we have made in a decade since the beginning of our work, in the fall of 2005. For the sake of efficiency, we relied on bank inspection services: we have to intervene in the institutions to conduct assessment missions that once internal rating models prévalidés by internal auditors.

The great French settlements will be ready for May 31, 2007

The implementation of Basel 2 is followed as"a place" with, in my view, an excellent collaboration between the banks and the banking commission. The perfect course of this project is being monitored "like milk on fire". It should not be a big surprise, even if it is still possible that an institution is not ready, in fine, for all its activities. Six major French groups are set a target to be method advanced in 2008. But some will spend perhaps firstly by the base method, for certain portfolios, or certain subsidiaries. This is not a problem. We have used to say that Basel 2 is a journey, more than a destination. The important thing is to work with institutions to advance together, in a case where our interests are common.

Until now, have you brought to refuse to give your downstream internal rating model

For the ten blocks that we have already examined, we have given green lights sometimes recognizance with conditions. In other words, we generally ask the institution to carry out some additional work, if they must be completed before January 1, 2008 or if it can be deferred. In some cases, we will return to see if our recommendations were followed by effect. In other cases, suffice to ask an audit report to the internal inspection of the respective Bank, either we believe the establishment on floor; This well obviously depends on the importance of correct issues.

Roundtrips between European regulators are not likely to lead to bottlenecks

Not to the extent "host" supervisors, i.e. those of the countries in which the subsidiaries of French groups are installed, will have six months to give their opinion on our work and that, without response on their part after that, the "home" supervisor (in this case the Banking Commission working on consolidated basis) will decide alone. However, it is unlikely that there is, both cooperation between European supervisors has developed in recent months.

The United States coming through Basel 2 before 2009-2010

In the implementation of Basel 2, the differences between Europeans and Americans are clearly the most complicated file. I think, however, that the United States will move to Basel 2 of the particular fact competition with European banks, which should benefit from regulatory capital requirements more appropriate to their risk with the new standards. I was in the United States end of November and I have realized that things were moving, although the pace may still seem slow. The rules applying to us banks having exclusively domestic activity ("Basel 1 Advanced") were the subject of a publication by the Board of the Federal Reserve on December 5, which should facilitate the adoption of Basel 2. And even if there is more lag of one year between Americans and Europeans, it is not dramatic. In the meantime, for the subsidiaries of institutions, things are clear: that they are installed in European countries or the United States, they will respect the local regulations. For branches, the calculation should continue to be at the level of European or American headquarters.

How do you interpret the will of the American (FDIC) deposit insurance fund to maintain the "leverage ratio"

The Europeans are not favourable because it is not sensitive to the risk ratio, and that it does not take into account the risk off-balance sheet. Americans who want to keep it, the FDIC, supervisors see two advantages. First, this ratio is structured more easily than Basel 2 with their "Prompt Corrective Action", regulation which imposes automatic prudential due diligence in decline in the ratio, the final step is the closure of the Bank. On the other hand, they are concerned about the decline of the own funds requirements that sometimes generates Basel 2 and would like in this way dispose "of an additional floor." European supervisors consider that the level of regulatory own funds generated by Basel 2 is a point that deserves their attention, but that the "leverage ratio" is a poor response to a good question.

Basel II not reduced disproportionately the capital of the banks

I do not. According to figures of the 5th impact study (QIS 5), necessarily a little optimistic, because generated models not yet validated by the supervisors, pillar 1 Basel 2 reduce funds regulatory own 30 for the activity of retail (for which Basel 1 required, the general opinion, too much capital), and about 7 average for the whole of the portfolio. But these figures should be qualified. First, these capital requirements should be revised upward in pillar 2. Then, the situation today is exceptionally favourable but the probability of failure is likely to go up and therefore levels of own funds also. Finally, Basel 2 was planned to cap the reduction of the own funds of banks to Basel I: for each facility, the amount of regulatory own funds may not fall below 95 of what it would have been under Basel I during the first year of entry into force of the new device, this passing percentage to 90 and 85 then the next two years. The objective is to give us the time to correct the parameters if necessary.

On the risks of credit, will banks not focus on their best customers

I do not think. Basel 2 will above all allow them to lead to a better analysis of all the parameters. The interest of the banks is not systematically refuse credits to certain categories of borrowers, but to measure as finely as possible risks to price appropriately. It is certain that a company benefiting from a good signature will pay less than a poorly graded company. And this is not a matter of size. Thus, banks will in all cases their regulatory capital on SME credits reduce with Basel 2.