the members of the board, in their individual capacity, should carry - out. responsibilities of the board that have been established include the selection of officers and personnel to the adoption and implementation of adequate risk management policies. also, consistent with the general banking law, the bsp has required that banks have at least two independent directors on their boards. in addition, we have prescribed that risk management, corporate governance and audit committees be created in the board. all these may be considered as parts of an internal line of defense against excessive risk taking or attempts to cut corners that may result in unsafe and unsound practices. enhancing transparency, disclosure and financial reporting our campaign for good corporate governance didn ’ t only cover determining “ fit and proper ” officials, but also included equipping the officials with the necessary tools for making informed decisions and for relaying the same to stakeholders. in this respect, the bsp adopted the international accounting standards. this aligns our financial reporting principles with the global standards and substantially improves the amount and quality of information disclosed by financial institutions to the public, beyond published audited financial statements and annual reports. along the line of promoting transparency and disclosure in financial reporting, we have established an accreditation process for external auditors. this raises the bar for adherence to control standards and ensures that financial institutions will be audited only by external auditors who adhere to such quality control standards. i am pleased to report that to further cement this move, the bsp signed ( just last month ) together with the securities and exchange commission ( sec ), the insurance commission ( ic ) and the board of accountancy a memorandum of agreement ( moa ) to provide a working framework to harmonize the different accreditation processes of the regulatory agencies and allow mutual recognition of external auditors that they have individually accredited for certain types of institutions. enhancing supervisory tools many of us may have heard that this crisis was brought about by individual actions that have necessitated correction by collective action. market participants have been seen to manage their risks effectively up to the point where the cost of doing so makes sense from their own point of view only. this presents a challenge to regulators. to avoid stifling appropriate credit activities and risk taking, the regulator must find the suitable balance when crafting banking regulation and enforcing supervision. the regulator must ensure that risks are well understood and appreciated by all concerned economic agents. in addition, the appropriate incentive structures must be present so that market discipline operates effectively in the future. the bsp, as an oversee

##s, the industry charted a high average score of 84 %. although this did not come as a surprise, we are nevertheless pleased as we take this as an indication that the banking industry is indeed embracing the principles of good governance. i would also like to share with you, that among the six ( 6 ) corporate governance categories, the u / kbs registered the highest score in control environment and processes at 89 %. the top three ( 3 ) u / kbs had an average score of 94 % while the bottom three had an average score of 66 %, or a margin of 28 %. however, if we look at the average scores of the top three ( 3 ) and bottom three ( 3 ) on a per group basis the margin narrowed down to 15 % as the top three ( 3 ) of the thirteen ( 13 ) universal banks received an average score of 94 %. the same margin was maintained for the seven ( 7 ) commercial banks, as their top three posted an average score of 85 %. the bsp intends to continue the cgs for banks on a yearly basis and eventually expand its coverage so as to include all types of banks under our supervision. we believe that this endeavor will take us a step closer to strengthened investor confidence and capital market development. roadmap for the future moving forward, the bsp will continue to maintain its stance of being a step ahead in initiating reforms for good governance in the financial industry. for example, we recently conducted a study on whether we should impose a limit on the number of institutions wherein an individual may serve as an independent director. based on our assessment, there is no immediate need to change existing regulations, we will, however, monitor any development in the industry that may indicate an abuse of the existing regulatory leeway. also, we are proposing an amendment to the bsp charter that would require our prior approval for the transfer of substantial equity holdings in banks. we believe that this additional measure would help in ensuring that only those with indubitable integrity, capacity and competence would have a stake in the banking industry. the bsp has also started planting the seeds for increased financial literacy in the country as we believe that the financial sector and ultimately the philippine economy will benefit from increased public awareness. this will strengthen the confidence of the market in the financial system and at the same time, foster a more transparent way of doing business. the bsp created a group dedicated solely to advancing financial literacy and we have also tied - up with the