actions we have taken on loss absorbency are designed to create the right oversight incentives for shareholders and bondholders by literally putting them at risk of loss. this will without doubt have an effect on culture. i want to end with a few broader reflections on the role of culture. the basic difference between the role of the regulator and management of firms is that our objective is framed exclusively in terms of the public interest. for firms, it is important to recognise that a sustainable and viable business model is one that provides an acceptable rate of return to those who take the risk of providing the necessary loss absorbing capacity, typically its risk capital. firms exist to service customers who make up the public interest, which of course means that service includes the notion of not exploiting customers, a value one might expect to be given in an organisation ’ s culture. today, the public perception of banking, and some other areas of finance, remains too much towards the exploitative “ greed is good ” end of the spectrum. major changes have occurred since the crisis which have improved behaviour in firms, but public opinion broadly does not recognise these developments and tends to think that nothing has changed. culture is an important part of demonstrating that change. now, i do see evidence of that change happening, and a big challenge for all of us, regulated and regulator is to do all that we can to keep pushing that change forward. in some cases i think there should be greater clarity in terms of the outcomes that firms are seeking from the bis central bankers ’ speeches changes they make, how progress is assessed and whether there is sufficient consistency across the organisation. these are all points that i know from my discussions with them are in the sights of colette bowe and alison cottrell and their colleagues at the banking standards board, and i welcome the work they are doing. it is of course very reasonable to ask what as regulators we can do to further the goal of restoring trust through strong culture. i have set out what i see as the important role of the senior managers regime. going beyond that, in the pra from the outset we have emphasised that we are a forward - looking supervisor of firms, and at the heart of our approach is the application of judgement set against a framework of rules. we cannot write a rule to take care of every situation that may occur, and as a forward looking supervisor we are applying judgement in conditions of uncertainty about the future. how firms deal with the uncertainty of the future will also shape their culture

or conduct failing in a firm which did not have among its root causes a failure of culture as manifested in governance, remuneration, risk management or tone from the top. culture has thus laid the ground for bad outcomes, for instance where management are so convinced of their rightness that they hurtle for the cliff without questioning the direction of travel. we talk often about credit risk, market risk, liquidity risk, conduct risk in it ’ s several forms. you can add to that, hubris risk, the risk of blinding over - confidence. if i may say so, it is a risk that can be magnified by broader social attitudes. ten years ago there was considerable reverence towards, and little questioning of, the ability of banks and bankers to make money or of whether boards demonstrated a sufficient diversity of view and outlook to sustain challenge. how things have changed. healthy scepticism channelled into intelligent and forceful questioning of the self - confident can be a good thing. in turn, culture matters to us as financial regulators because it can, left alone, tend to shape and encourage bad outcomes, but it doesn ’ t have to do that. what can we do therefore as regulators to shape and influence better outcomes on a more consistent basis? let me start with one thing that we cannot do. as regulators, we are not able, and should not try, to determine the culture of firms. we cannot write a regulatory rule that settles culture. rather, it is the product of many things, which regulators can influence, but much more directly which firms themselves can shape. we seek to ensure that firms have robust governance, which includes appropriate challenge from all levels of the organisation ; and promote the acceptance that not all news can be good and the willingness to act on and respond promptly to bad news. we insist that remuneration is structured to ensure that individuals have skin in the game, namely that a meaningful amount of past remuneration is bis central bankers ’ speeches retained or deferred and for senior people is at risk should problems then emerge. we require that risk management and internal audit in firms are effective and act to root out poor incentives and weak controls. all of this is important and central to what we do as regulators, but let me reinforce the point that culture begins and lives, and i am afraid dies, at home, with firms. it is not for us as regulators to prescribe culture, that would not work. firms and their management have to want