This is worrying, because misconduct erodes trust in the system. If investors, depositors and policy holders stop believing that their interests are being safeguarded, the entire system quickly comes unraveled at significant costs to society. These costs can arise from failures of financial institutions, a misallocation of economic resources, or simply steep fines that destroy shareholder value and employment prospects for affected workers. Since the global financial crisis, banks have paid more than USD320 billion in fines and legal costs and have been the subject of numerous Government financial inquiries due to misconduct. In Malaysia, in the last 5 years, Bank Negara Malaysia has imposed fines on financial services providers to the tune of RM116 million. A survey conducted by the Bank revealed that almost twothirds of reported losses by banks in 2016 were associated with internal fraud, regulatory noncompliance and operational lapses. We have examined these incidents in some depth. Our observations lead us to conclude that behaviour is very much influenced bycontextual factors such as organisational values, incentives and management responses to misconduct or non-compliance. The rightcontextual setting can exert a powerful influence on individual behaviour. We believe this begins with setting and clearly communicating expectations of desired behaviour. Without clarity on what is acceptable in the first place, it would not be possible to encourage, much less enforce, these expectations. The FSPB serves an important role in this regard through its work in defining and developing codes of behaviour for financial institutions.

Accordingly, the Central Bank will continue to promote development initiatives through co-ordinating credit delivery activities among the government, financial institutions, foreign donors and beneficiaries. In 2007, the Bank will expand its outreach under existing micro finance programmes, for families in poverty in various parts of the country, with the assistance of lending institutions and other support groups. New and improved poverty focused micro finance programmes will be developed through self-help group mechanisms, while encouraging savings habits and ensuring credit availability for diverse economic opportunities. The Central Bank has also recognised the vital importance of foreign remittances in supplying funds for investment. Thus, the Central Bank will continue to assist both the Bureau of Foreign Employment and the banking sector to attract remittances to Sri Lanka through the formal banking channels. The ambitious awareness campaign embarked by the Central Bank in 2006 will continue with greater interest in 2007, with the aim of raising the level and quantities of remittances significantly. We will also continue in our efforts to support financial markets during the year. The public debt management policy of the Central Bank will be reformulated to develop and strengthen the government securities market, enhance the efficiency in the debt market and access to finance, and maintain a proper balance between commercial borrowings from local and external sources. Towards such objective, the Central Bank will continue in its efforts to strengthen the intermediary participants in the government securities market, and continue with the debt consolidation process while expanding the investor base in government securities. 8.