have to be alive to the other types of ethical conflict that may arise as the banking environment becomes increasingly competitive and there is even more focus on the bottom line. the hkma has already pointed out that as a result of interest rate deregulation that there will be both winners and losers among bank customers. those with small balances and relatively large volume of transactions may find that increased fees outweigh the benefit of any increase in the interest paid on their deposits. as has happened elsewhere, banks may also become more selective in their choice of customers and the level of customer service may be affected if the number of branches is pruned to save costs. a move towards a user pays approach and a reduction in cross - subsidisation are manifestations of the greater efficiency that deregulation is intended to produce. but banks will need to be careful that this process is handled with tact and sensitivity. otherwise, they may be open to accusations from sections of the community that they are neglecting their social responsibility by curtailing or increasing the cost of basic banking services to the economically disadvantaged. this was certainly the accusation made against the australian banks after deregulation there. a further aspect is that the possibility of higher and more extensive charges for banking services will make it all the more important for the banks to deliver sufficient information to their customers about these charges. let me clarify at this point the hkma ’ s attitude to ethical matters and particularly the issue of “ fairness ” to customers. our main responsibility under the banking ordinance is to promote the general stability and effective working of the banking system. in common with banking regulators in other countries, we interpret this to mean that our principal concern should be to determine that individual banks are financially sound and prudently managed. the aim is to reduce the risk of bank failure that would result in depositors losing money and threaten the stability of the banking system as a whole. we concentrate therefore on checking that the banks have adequate capital and liquidity and effective management and internal controls. however, this is not all that we do. section 7 of the banking ordinance goes on to say, among other things, that our functions include the following aspects that have a distinct “ ethical ” flavour : • taking reasonable steps to ensure that authorised institutions operate in a “ responsible, honest and business - like manner ” ; • promoting and encouraging “ proper standards of conduct and sound and prudent business practices ” ; • suppressing “ illegal, dishonourable or improper practices ”

cyber terrorists which now have far superior capabilities, and probably a good knowledge of the internal vulnerabilities. in order to mitigate this risk, banks will have to pool - up their resources and share their experiences with each other on regular basis and devise strategies and programs to counter the threats they face as an industry. • sixth, if the industry concludes that block chain enabled services and their providers will gain more prominence going forward then it is important to take proactive measures to contain their influence. for example, smart contracts and their legal enforceability in a court of law, role of crypto currencies, cross border trade and payments and customer identity management are some of the areas that i think will be important to be looked into. • last but not the least, continuous capacity building of bankers and their regulators is the key for growing and thriving in a digital future. empowering finance professionals with requisite skills will be necessary in wake of increasing complexity of global standards and transformation taking place in financial industry. financial industry has to adopt collaborative approach for enhancing professional capacity of their human capital through local and international solutions to keep pace with the changing financial land scape. central banks must acquire and page 14 of 15 enhance the capacity and skill set of their staff especially in areas of algorithmic based system audits, system integrity & security audit and data analytics based regulatory compliance skills. while the challenges are huge, i have full confidence in the skills and abilities of banking community in our two countries. i am sure that you will adapt to the changing realities of times ahead, take these challenges as opportunities and deliver the best of best to citizens of your great country. ladies and gentlemen ; in the end, i would like to once again thank the central bank of sri lanka and the association of professional bankers – sri lanka for inviting me to deliver the keynote address for this year ’ s annual convention. thank you for your attention! page 15 of 15