the euro area. as the ssm changed the way supervision addresses problems and communicates what it expects to be done by banks, it also changed the timing and the way banks, their management and their owners acknowledge shortcomings and find solutions. one important step led to a common methodology for the supervisory review and evaluation process, the core of supervisory activities and the basis for the capital level the ssm expects a bank to hold according to its individual risk profile. starting with 19 different supervisory practices and information levels, it was pivotal to set a basis of quantitative as well as qualitative information about individual banks and the differences in national banking systems. we can now reap the fruit from bis central bankers ’ speeches having a single european supervisor by moving our capacity for benchmarking to a european level. but it was not only a busy year, it was a very special year, too. everything we decided, we decided for first time. everything we did set a precedent. thus, everything had to be discussed in the supervisory board of the ssm, consisting of the representatives of the 26 national supervisory authorities as well as of 6 ecb representatives. we formulated supervisory policies in all major areas, for example large exposure limits, the fitness and properness of board members, conditions for changes in qualifying holdings, prerequisites for capital reductions and issuances, model approvals, capital and liquidity waivers, ips etc. we also discussed and agreed on concepts and processes for supervisory planning, onsite inspections, risk analysis, reporting of banks. integrating 19 national supervisory cultures and traditions with a wide range of administrative practices demanded and still demands organisational and methodological rigour. this rigour is sometimes misinterpreted as being not proportional or not in line with qualitative supervision. but common concepts and methods have helped and are helping us to put in place the fundamental pillars of a truly european supervisory approach. some stakeholders had grown fond of some habits and customs. those customs had to be abandoned to make room for a new common approach, as the objective of the ssm is not to preserve 19 national approaches but to foster convergence towards best standards of supervision. it is not my intention to only look back at our past achievements. we cannot lean back and hope for easy wins in the years to come. there are still a lot of challenges ahead of us, which we have to face and address. firstly, there are issues for which we still lack a common approach. for

of the bank. this is a key part of the governance structure. of course, these arrangements are not unique in any way. they are designed both to meet requirements for commonwealth authorities and also to be in line with good practice at commercial entities. they do, however, give us at the reserve bank an insight into some of the practical challenges facing other financial organisations. of particular importance to this audience, we also recognise the challenges involved with appointing, training and keeping an audit staff capable of assessing whether the controls are working as they should. our audit team has continually to improve its understanding of the breadth and depth of our business and changes to it. to help us maintain best practice, our auditors need to ensure that their technical skills remain up to speed. the iia ’ s training and certification processes play an important role in assisting this process. fostering improvements to the practice of identifying and managing risks, and to the audit processes that are an integral part of that, are central to development of policies aimed at bis central bankers ’ speeches fostering greater financial stability, both in australia and internationally. the financial stresses of the past few years have placed much greater emphasis on this aspect of our policy work in the reserve bank. there are few signs that the additional focus is going to lessen any time soon. if anything, it will increase. domestically, we have worked closely with the other members of the council of financial regulators on a number of initiatives including the financial claims scheme, the structure of financial market regulation and the role of central counterparties in the settlement of securities and derivatives transactions. internationally, through our membership of the financial stability board, the basel committee on banking supervision and the g - 20, along with colleagues in apra and the treasury, we have been involved in efforts to strengthen the international financial architecture, the rules governing the risks to which financial institutions are exposed and the buffers they are obliged to maintain in case things go wrong. the implications of these initiatives on the way in which financial institutions are managed are potentially far reaching. they are also important for internal auditors, in two respects. first, they are designed to make the institutions you are working for more resilient in the face of a wide range of pressures. if the changes are made effectively, they should help you sleep a little better at night. but second, many of the changes are complex and challenging, requiring important shifts in the way institutions operate, with even more emphasis on controls focused on risk than in the past