, the easier it is to share relevant information and the higher the chances for an early identification of risks. this will improve the quality and promptness of the bank ’ s response to any occurrence of risk or non - compliance. it is also crucial that institutions invest sufficiently in talent development within the compliance function. at the board - level, this priority is often overlooked. however, cultivating a group of professional compliance officers within a bank is essential. they must be fluent with the business operations of the bank, plugged - in to organisational developments, and have the authority and network to engage effectively throughout the bank. possessing professional qualifications also play a key role in this, such as the certification in regulatory compliance offered by the asian institute of chartered bankers, in conjunction with the international compliance association. today, banks are realising how important it is for them to get in front of compliance issues. failure to realise this is an expensive error. banks need to invest and build systems ; and create a culture that ensures that they are the first to identify and address compliance failures, and proactively communicate them to the regulators and other authorities. beginning next year, we will be raising the stakes further by publishing enforcement actions taken by bank negara malaysia. specifics will be mentioned, including the name of the banks, nature of breaches and remedial actions taken. in addition, we are also working towards introducing a mandatory employment reference process for the industry. this will require banks to keep and share records of misconduct by employees to facilitate informed recruitment decisions. conclusion my aim here is to provoke a much broader view of compliance, one that is strategic as opposed to operational. 4 / 5 bis central bankers'speeches compliance supports smart, efficient and balanced regulation. this, in turn, builds trust and confidence among the public, which is the very foundation of the banking industry. only with a strong and reliable banking industry can we serve the economy and the overall well being of our people. 5 / 5 bis central bankers'speeches

exclusively driven by the avoidance of regulatory fines, then we are missing the big picture. we should be aware that a strong compliance function and culture makes good business sense. today i would like to address the following matters : i. the role of compliance in supporting the integrity of regulatory frameworks ; ii the larger social and economic consequences that can arise from compliance lapses ; and iii. the impact on public confidence and trust in an environment where financial intermediation is no longer the exclusive domain of banks. 1 / 5 bis central bankers'speeches regulation, particularly for banks, has become significantly more complex as banks grow in size and sophistication. in the face of these growing complexities, global standard setters continue to develop standards that can best manage this issue. in general, bank negara malaysia has been supportive of moves to make regulation simpler and less costly. even so, some complexity in regulation is inevitable due to rapid advancements in the business of banking, compounded by the process of globalisation and changes in the banks ’ operating landscape and interactions with other components of the financial system. continuous regulatory changes are necessary and will be the norm as efforts are continuously taken to safeguard financial stability. if you observed carefully over the last few years, it is not just banking rules that are becoming more complex. developments in financial reporting standards are adding to this complexity as well, in ways that we may not even fully contemplate yet. regulation has also evolved from detailed prescriptions to “ standards ”, which focus on principles and outcomes. with this evolution, substantial value judgement and discretion are required in such an approach. banks need to determine and decide on how to reflect these standards in their day - to - day operations. financial reporting standards now work in much the same way, with considerable management discretion required. this is a sensible approach, given that operating models and business strategies differ from one bank to another. prescriptive rules, especially if they are rigid, are always ill - suited if intended for all institutions, as they often lead to numerous exemptions, waivers or perverse outcomes. so, even if we exhaustively pursue prescriptive rules to secure financial stability, there will inevitably be areas where allowance for judgement is necessary. regulators have a keen interest in the development of a strong compliance function within banks given the more complex rules, combined with the wider use of principle or outcome - based regulations. the compliance function plays at least three critical roles. first, to ensure a bank ’ s