Corporate governance reforms the world over have focused on addressing the principal-agent problem chiefly through strengthening the independence of Boards. This is necessary but not sufficient. A good director must not only be independent in form, but must be competent so that he can also be independent in substance. Directors must be able and willing to devote time to their roles and have the relevant experience to question management and form independent views on strategy, risk, and performance. 17. This is particularly relevant in the area of risk management. Boards have an important role to play in determining the company’s risk tolerance and risk policies. They must oversee management in designing, implementing, and monitoring the company’s systems for managing risk. 18. But risk is fundamentally about uncertainty and is therefore inherently subjective. This is why a diverse Board – with both executive and independent directors as well as a variety of backgrounds and expertise – is key. Given the complexity of the environment we operate in, only through robust debate and rigorous consideration of the range of possibilities can Boards make sound decisions on risk and strategy. 19. Putting together diverse Boards with competent directors, and at the same time meeting the tighter requirements for independence, is a real challenge – especially for a small country like Singapore with a limited talent pool. The solution does not lie in lowering our standards for either independence or competence. Companies must take a more proactive approach in identifying and making available training to their directors.

It is by all means a very ambitious project that includes more than 55 activities and benchmarks, more than 10 directives to be transposed, several legal acts to be prepared, and many internal procedures to be created for a better supervision that complies with the international best practices. This project comes at a very specific moment for the global financial sector. It aims to create conditions for long term economic stability and growth by strengthening the regulatory and supervisory frameworks of the capital and financial markets and by improving the institutional and regulatory capacities of the financial sector regulators to supervise financial markets and institutions in line with the EU acquis. Therefore, the objectives of the Twinning Project are fully in line with the main lesson from the crisis – that stability and growth cannot be maintained without a stable and well functioning financial sector. First, let me present our consortium and the project team. The consortium unites the experience of a Еurosystem central bank (De Netherlandsche Bank) – with a proven track record of successful technical assistance projects for accession country institutions – together with the expertise of the Bulgarian National Bank and the Financial Supervision Commission, both having the most recent and relevant experience in EU harmonization in a new Member State. This combination of experience is further strengthened by the longstanding and successful cooperation between the consortium members. The advantage of having a consortium is that it offers larger experience and a broader pull of experts from the twinning partner institutions.