something goes wrong. conclusion in conclusion, when times are good, we rarely feel an urgency to make changes. and these are certainly good times. but numbers can have a funny way of not revealing the whole truth. a sound spreadsheet may mask unethical behavior, a well - capitalized bank may be on the road to ruin, and a neglected corporate culture can turn toxic. we must stay vigilant around the “ softer ” side of supervision. strong culture and robust corporate governance are our first lines of defense. they ’ re a critical part of the tool kit when it comes to protecting people, banks, and the economy from risk, scandal, and harm. 3 / 3 bis central bankers'speeches

people are cutting corners, taking excessive risks, or violating rules and regulations. even worse, they can distract you from digging into the truth and unearthing unethical business practices and misconduct that may hide below the surface. the well - known challenge with culture is that, in contrast with things like capital and liquidity, culture feels “ softer ” and, therefore, more difficult to measure. and often in finance there ’ s a tendency to disregard what can ’ t be quantified. but just because it ’ s hard to measure doesn ’ t mean we should ignore it or downplay its importance. as we heard throughout today ’ s conference, culture shapes every conversation, every decision, and every action ; it is at the root of whether an organization performs in a manner consistent with its mission, or not. how to achieve a better banking culture this brings me back to the issue of culture as a long - term investment that can ’ t be “ fixed ” overnight. several years ago, rich lyons, dean at berkeley ’ s haas school of business, spoke at the san francisco fed and talked about culture in a way that has stuck with me ever since. transforming a culture is a five - to ten - year project ; keeping it that way is an ongoing mission that requires strong leadership and consistent action. as a leader of a large organization, i ’ ve taken that message to heart. i ’ ve found that a culture based on the principle of open and authentic dialogue, that embraces our diverse backgrounds and perspectives delivers better results. i ’ ve found that well - defined collective values and direction lead to greater collaboration and innovation. finally, i ’ ve found that this work is never a finished project, but an ongoing one that constantly evolves. i started by saying that i feel a sense of urgency in addressing banking culture. so where do i see the priorities for supervision? as supervisors, we need to ensure that bank management and boards are exerting strong and effective leadership with robust governance. that means holding management and boards of directors to high standards in terms of culture and conduct, even when the numbers look rosy. it means ensuring corporate values are clearly articulated and incentives are squarely align with a bank ’ s strategic goals. it means identifying, communicating, and mitigating risks in a timely and 2 / 3 bis central bankers'speeches effective manner. it means that employees feel empowered to raise their hands if they see wrongdoing, and that comprehensive fixes are implemented when