A similar consolidation process is taking place in the Central Securities Depositaries (CSD) area, paving the way for a more efficient functioning of Delivery Versus Payment (DVP) procedures, and  2  BIS Review 32/2003  easier and safer settlement of cross-border securities transactions. This latter aspect is of particular interest for the Eurosystem, as a smooth functioning of securities settlement infrastructures is key for an efficient implementation of monetary policy. Structural changes, such as the setting up of Euroclear’s Single Settlement Engine, are of great interest in that regard: the so called Single Settlement Engine (SSE) by 2005 will enable participants to settle securities transactions on a delivery-versus-payment basis between the group’s different depositories, more effectively than today and at a lower cost, without changing their interface or procedure. Moreover, the central banks of the five countries concerned are discussing mechanisms that would allow Euroclear participants to settle all their transactions in central bank money and on a real-time gross settlement basis with the central bank of their choice. 1.5 All these developments highlight the necessity to harmonise operational practices, to define common standards and to adopt new procedures for co-operation between supervisory authorities. To function properly, markets require a well designed legal and regulatory infrastructure. Since the institutional reforms advocated by the Lamfalussy Report were set in train in 2001, European integration has made significant headway. Let me emphasise how the Lamfalussy works were of utmost interest and greatly efficient.

This in turn means that the board and the senior management are now placed with greater accountability and responsibility in this area. This approach also benefits the industry as they are not hamstrung to introduce new and innovative products and services. The intent is also to improve the time-to-market. However, it comes with a responsibility. Financial institutions are expected to apply the standards judiciously and proportionately. This should take into account risks within their business activities and strategies, and the role and relationships within the broader financial system. Another issue organisations face in the conduct of their businesses arises from principal-agent relationships. Establishing clear behavioural norms with the right combination of controls and incentives, to shape the desired behavior is key. For all the above, the compliance function can play a meaningful role in this process. Compliance in the context of broader responsibilities to society As the theme for this conference suggests, compliance is a responsibility. What I have said so far has focused on perspectives from the point of view of individuals within the industry. However, compliance must also be viewed in relation to the broader financial system and society itself. A key lesson from the global financial crisis in 2008 was that individual behavior, even though well intended and rational from an individual’s point of view, can cause massive damage at the aggregate level. In many ways, the complexity of rules that apply to the financial system is a reflection of its important role in the economy and society.