financial sector. the various forms of misconduct impose direct costs such as fines, legal fees in investigating allegations and defending lawsuits, and internal monitoring costs that should matter to firms. in this view, a principal benefit to a financial firm of having a strong culture that builds trustworthiness is the avoidance of the bad behavior that can carry significant monetary costs and can inflict destructive damage to the organization ’ s reputation. firms should have every incentive to manage and internalize those potential costs. more broadly, there may be additional adverse effects on other firms or the financial sector as a whole if there is a widespread lack of trust in financial services. similarly, my colleague michael strine has argued that the financial industry exists, in part, to enhance the public good and thus faces a higher degree of social responsibility due to its role in supporting the broader economy. 4 both of these effects suggest a role for the public sector in facilitating appropriate behavior and conduct in the financial services industry. supervision can contribute to this through support for the development of effective internal governance regimes, prudent risk management policies, and strong compliance and control structures, all within a framework of effective oversight from the board of directors. conclusion to conclude, i ’ ve spoken today about the conceptual rationale for public sector intervention through supervision and some practical issues related to how we execute on our supervisory responsibilities at the federal reserve bank of new york. our goal is to promote a safe, sound, and stable banking and financial system that supports the growth and stability of the u. s. economy, and we will continue to strive to meet these responsibilities. thank you very much for your attention this afternoon. i ’ d be happy to take some questions. forming the next generation of bankers : the future of business education and ethics, michael strine, march 22, 2016. bis central bankers ’ speeches

with other agencies to ensure that firms are dedicating resources and taking the appropriate actions to defend the operations that are critical to the financial services sector against cyber threats. this is particularly true for those risks that could be channeled through interconnected organizations and that could potentially have an impact on other firms and more broadly across the sector. • fintech the financial sector, like the broader u. s. economy and society, is becoming increasingly digital and there is considerable discussion of “ fintech ” – defined simply as the intersection between financial services and new technologies. a recent industry study, for example, reports that investment in fintech companies grew from $ 1. 8 billion in 2010 to $ 19 billion in 2015. 3 it is unclear, however, whether fintech will enhance or fundamentally disrupt the financial service and payments industries, or perhaps it is some combination of both. in any of these cases, however, supervisors will have a keen interest in monitoring the impact on the business models and risks of financial institutions and the way financial intermediation is done. we observe financial firms engaging in a variety of ways with fintech companies. this can be through the development of in - house projects such as setting up innovation labs or encouraging developers to code on open application program interfaces ( apis ). this can also be through collaboration with industry consortiums to come up with unified industry standards that enhance operability and enable future technological advancements, or it can be through partnering with or investing directly in fintech companies. some of the interesting questions for supervision revolve around things like : what new benefits might these new technologies bring? will they enhance existing processes or bring about entirely new solutions to existing financial sector problems? will they create risk, mitigate risk, or simply reallocate existing risks? how should the current supervisory framework evolve to incorporate these types of developments? the new york fed is assessing the implications of fintech developments through participation in a wide range of federal reserve system, interagency, and “ digital disruption : how fintech is forcing banking to a tipping point, ” march 2016. bis central bankers ’ speeches international efforts. in addition, we meet regularly with supervised firms, fintech companies, and industry groups to follow these developments. our supervisory program will continue to evolve with the underlying technologies. • reputation risk over the past few years, the new york fed has been challenging the financial industry to consider the many factors that have contributed to recent, widespread misconduct and the perceived lack of trust in the