changes that are frequently focused on. i am still sceptical as to whether the cultures and values that firms espouse are, in many cases, the ones that they really want and believe in, and will be sustained at moments of real pressure. but, it is my job to be sceptical. it is your customers ’ views that are more important, and it is the treatment of them, that you are demonstrably putting them first, that is the true test. and only through cultural change can you pass this test again and again, and in doing so, restore trust in the system. i thank you for your attention. 1 address to the association of compliance officers - 10 november 2017 2 “ culture eats strategy for breakfast ” was first articulated by peter druker. 3 financial stability board guidance on supervisory interaction with financial institutions on risk culture, 7 april 2014. 4 examples : honohan report 2010 ‘.. risky borrowing and lending behaviours ’ ; dirt inquiry 1986 – 1998 ‘ misbehaviour by banks in facilitating tax evasion ’ ; tracker mortgage review 2017. 5 for details on the central bank ’ s financial regulation structure, see address to the association of compliance officers – 10 november 2017 6 examples : bank of international settlements, 2016 ; ecb, 2015 ; federal reserve bank of new york, 2017 ; bank of england, 2016. 7 group of thirty ( g30 ), banking conduct and culture : a call for sustained and comprehensive reform, 2015. 8 daily, c. m., dalton, d. r. and cannella, a. a. ( 2003 ) corporate governance : decades of dialogue and data. academy of management review, 28 ( 3 ), pp. 371 – 382. ; maznevski, m. l. ( 1994 ) understanding our differences : performance in decision - making groups with diverse members. human relations, 47 ( 5 ), pp. 531 – 552. ; robinson, g. and dechant, k. ( 1997 ) building a business case for diversity. academy of management executive, 11, pp. 164 – 177. ; zelechowski, d. and bilimoria, d. ( 2004 ) characteristics of women and men corporate inside directors in the us. corporate governance : an international review, 12 ( 3 ), pp. 337 – 42. 9 hoogendoorn, s., oosterbeek, h. and van

of course such solutions are not as easily taken off the shelf as plain vanilla lending. in particular any insurance contract is beset by moral hazard problems. while these could be addressed, unfortunately no pre - existing template exists for intergovernmental arrangements of this type, and most observers are sceptical that one could be put in place soon. if so, we must work with what we have, and that is the policy strategy worked out for the imf - eu programme. it has two main elements, which essentially continue and deepen existing policies. first, there is phased deficit reduction projected to bring government debt under control and declining by 2014. after the period of political uncertainty engendered by the run - up to the general election, the new government has reaffirmed the fiscal objectives of the programme and specifically to the 2011 and 2012 budgetary numbers. this is key to reducing risk and restoring confidence, but i will say no more about it here. second, accelerated resolution of the banking crisis for which we would have hoped to turn the corner already, but has proved to be on a scale which has challenged available policy tools. the banking strategy thus involves further recapitalisation and accelerated downsizing. the recapitalisation of the banks will take place following the completion of the 2011 stress tests which, in line with the programme commitments, will be much more granular, more explicitly transparent, and tougher, than those of 2010. last year ’ s task was not just a question of assessing future losses under a speculative stress scenario ; instead we were still trying to evaluate the losses already embedded in the existing portfolio resulting from the property price collapse that had already occurred, especially for development property. in normal times, a well - run bank with good loan appraisal procedures will be able to forecast its likely loan losses fairly accurately, especially if the likely macroeconomic prospects can be bis central bankers ’ speeches pinned - down. but when it becomes clear that banks have made substantial underwriting errors across a wide range of their portfolio to the extent that began to become evident in late 2008 and early 2009, the range of uncertainty balloons out. standard valuation practices that work for properly underwritten loans in normal times are ineffective in such an environment in predicting the enormous systemic losses that can occur. thus, over the past couple of years, a point estimate – a single number – has been more misleading than helpful in terms of understanding the range of loss possibilities. usually the validity of stress tests is revealed