industry like banking that requires trust and confidence to support a stable business model. it is imperative that risk management keep pace with financial innovation. third, i ’ ll mention business conduct risk. the new york fed has challenged the financial industry to consider and address the many factors that have contributed to recent, widespread misconduct at large financial firms. 16 these incidents impose real costs in the form of fines, settlements, and the diversion of internal resources related to investigation and remediation. in addition, there are more difficult to measure costs linked to the potential loss of confidence and trust in the firm and the industry. recurring misconduct poses a real threat to the provision of financial services if customers and counterparties were to pull away from the sector. supervisors can help mitigate these risks by supporting the development of effective internal 5 / 7 bis central bankers'speeches governance regimes, prudent risk management policies, and strong compliance and control structures, all within a framework of effective oversight from the firm ’ s board of directors. sr 12 – 17, for example, describes the essential components of effective corporate governance and sets the expectation that a firm ’ s board of directors should establish and maintain a firm ’ s culture, incentives, structure, and processes necessary to promote compliance with laws, regulations, and supervisory guidance and to avoid conflicts of interest and the effective management of reputational and legal risks. using the trade - off language from earlier, this might be framed as ensuring that potential short - term gains are appropriately balanced against the longer - term objectives of serving clients and maximizing value over time. in my view, this goes further than the incentives, processes, and oversight roles. all of these are necessary, but they are not likely to be sufficient. firms also need to look at how leadership dimensions drive decisions, whether there is effective challenge from controls functions, how the inevitable mistakes are treated, and how compensation and promotions are determined. ultimately, establishing and maintaining an effective culture with appropriate risk governance and controls is the responsibility of individual firms and the industry, but the official sector can help highlight best practices, solve collective action problems, and drive toward socially desirable outcomes. and, finally, we must recognize that there are risks that we don ’ t see. we all suffer from blind spots — issues we should be thinking about, but aren ’ t. one of the most important supervisory challenges we face is to always ask ourselves — what are we missing? what else should we be studying? where are new risks emerging? as the financial

##ct among those who define the rules of the game, who control them and who are obliged to respond in time and prevent the consequences that everyone feels. i am satisfied that today the first associations with the national bank of serbia are stability and trust. each our decision is guided by system stability, as it is the basis of trust earned with it. it is not words but deeds that matter. this is the only way to preserve trust in the market, and thus in democracy and its main premise – the right to work. this is why the ultimate outcome of all our activities is the better life of citizens. today, the national bank of serbia is a guarantor of banking system stability in its full sense. at the same time, we are a cautious regulator striking a balance between safety and development. in such a positive climate, our banking sector is flourishing and developing. we tend to say that the serbian banking sector is highly capitalised and highly liquid. its soundness indicators are 1 / 2 bis central bankers'speeches among the best in the region. these are the verifiable facts. it is also indisputable that there is a strong feedback loop between the banking and real sectors. stability, which we have achieved and which we maintain, encourages dynamic, investment - based growth, and employment and wages are rising. what is the result? in serbia we have a healthy synergy of positive effects, when real sector growth positively impacts loan demand, higher - quality bank clients, and rising deposits. the banking sector uses its potential to support sustainable growth, while savings are rising also owing to confidence in the banking system, which is stable and resilient. i take pride in such synergy, as well as in the full coordination of policies, which is present in serbia in full scope. of course, it is evident that everything flows and changes. i believe we have a reason to be proud of our modern banking sector as well, which does not lag even in terms of innovations. today, financial service consumers in serbia have everything that consumers in advanced economies have. however, this did not happen on its own. with its infrastructure, the national bank of serbia often leads and supports the banking sector, which is developing the facilities of modern operation. in the contemporary age, which entails fast adjustment to clients ’ needs, everyone is creating the niches in which to have a competitive advantage. esteemed ladies and gentlemen, dear colleagues, the national bank of serbia is the mirror