Already some host supervisors have found that local managers may be unfamiliar with the parent organisation’s plans for Basel II: this understandably tends to make host supervisors less confident about the quality of an organisation’s planning and its readiness to move to Basel II. Moreover, it increases their need to ask more questions, some of which may duplicate the questions that the home supervisor or other host supervisors are asking. If a bank has already developed sufficiently detailed and transparent plans for its application of Basel II, a substantial portion of the hard work has already been done. Sharing those plans with home and host supervisors, and with managers throughout the bank’s operations and locations, should not require too much more effort. Instead, the bank should be in an even better position to focus on running its business confidently while still implementing its plans carefully for the future. Validation One of the greatest challenges – for both banks and supervisors – of the Basel II framework is the need to validate the systems and processes used to generate the parameters that serve as inputs into the IRB approach to credit risk. Although validation is foremost the responsibility of banks, supervisors must have a thorough understanding of validation in order to ensure overall integrity of bank’s activities in this area. In recognition of the importance of validation the Committee recently published six principles on validation that will guide our future work.

In this regard, it is heartening to note that the Association already requires its members to abide by the code of ethics for the financial sector issued by the Financial Services Professional Board. Going forward, the Association may consider refining this code of 2/5  BIS central bankers' speeches  ethics to better reflect the specificities of the financial advisory industry. For improved efficacy, the code should also be complemented, if I may suggest, by rigorous monitoring and strong enforcement. To this end, I would like to suggest the Association spearhead the development of an oversight programme aimed at identifying and responding to misconduct risks in a timely manner. Perspectives from members could contribute towards crafting more creative, practical and effective monitoring mechanisms, such as members’ compliance report cards. To further elevate the professionalism of financial advisers, Bank Negara Malaysia is currently reviewing the fit and proper requirements. These requirements will specify, among others, the factors to be observed in the assessment and appointment of key responsible persons, such as members of the Board and CEOs of the financial advisers, and financial advisers’ representatives. Adoption of these standards we hope will help to strengthen the credibility of the profession. Another aspect that is closely linked to professionalism is transparency. It is for this reason that the Bank has introduced additional disclosure requirements through the LIFE framework. These disclosures are intended to ensure that appropriate and fair advice is given to consumers who purchase insurance. Mandatory sales illustrations have also been enhanced.