Having made the economic case for increased financial integration allow me to spend a few moments outlining some practical steps that may be taken to achieve it. First, it is necessary to establish linkages between jurisdictions across the whole spectrum of financial infrastructure – the trading, payment, clearing, settlement and custodian systems for money and for financial instruments. This would facilitate the movement of savings between jurisdictions and make cross-border transactions more efficient. In this age these linkages are neither difficult nor costly to establish as the technology, in the form of electronic messaging platforms of acceptable security, is already available and in international use. 15. The second element concerns the relaxation of non-supervisory restrictions, where they exist, against access by foreign financial intermediaries to the domestic financial markets. The size of  2  BIS Review 14/2006  financial intermediaries, measured for example in terms of capital, is often a barrier to market access; but, as we know, size is not necessarily a good indicator of quality. Capital adequacy, assessed objectively by reference to risk, provides a better safeguard. Greater competition, wherever it comes from, also enhances efficiency, although allowances should be made for the weaker domestic institutions to enable them to cope and find viable long-term solutions, in the interest of financial stability. 16. The third element concerns the harmonisation of standards in the financial system. A degree of harmonisation, at least the adoption of minimum acceptable international standards, is essential for improving investor confidence and enriching the flow of capital within the region.

Compliance efforts will be effective and sustainable only in organizations where Compliance emerges from an ongoing board-level engagement. Compliance management therefore is the execution of business processes designed to manage risks and to continuously benchmark against expected parameters/tolerance levels applicable for the entire industry. 1.6 Compliance is considered to be costly, time consuming and an onerous endeavor. But, many financial institutions understand the criticality and the importance of better GRC and they are willing to devise strategies for leveraging their GRC systems to derive value as well as increase their compliance performance. Behind all these imperatives is the commitment at all levels to manage GRC in an integrated manner and inculcate the culture across the financial services industry. 1.7 The three GRC imperatives are interrelated in financial business and implementing them in isolation or treating them as separate elements would not be fruitful. In the past, most organizations have traditionally viewed, and some still continue to treat, GRC as separate components. The emerging perception of GRC is that it is an integrated set of concepts and, when applied holistically within an organization, it can add significant value and provide competitive advantage. Further, the holistic approach would be more efficient, consistent and legally sound and the Boards of Directors, senior management and staff at all levels would be involved in the organization’s conduct of business. Most financial institutions have viewed GRC as discrete activities undertaken by different departments with no coordinated efforts.