assessing a bank ’ s performance and practices relative to its peers. this should not be a purely mechanical exercise where the examiner demands that a bank meet or exceed financial indicators for its peer group. instead, we should use these assessments to understand a bank ’ s performance relative to peers in the context of its own unique facts and circumstances. the expectations that i have described for both banks and examiners are not just hypothetical. you may have heard much more about the banks that faltered under intense credit and liquidity pressures, but the federal reserve has also been focused on the performance of those community banks that have remained in sound condition throughout the crisis. many of the community banks supervised by the federal reserve that entered the crisis with a supervisory rating of “ 1 ” or “ 2 ” – the highest ratings on the 1 - to - 5 scale used by bank supervisors – have managed to keep these ratings. most of these banks entered the crisis with moderate exposures to commercial real estate, and continued to report strong earnings and net interest margins throughout the crisis. they reported very limited reliance on noncore funding and strong capital levels as they entered the crisis. they earned solid, though not spectacular, returns and they reported steady performance. and, while this is less quantifiable, many of these banks have effective boards of directors and strong and experienced management teams. it is important that examiners keep this in mind as they evaluate and refine their supervisory processes in the wake of the crisis. conclusion i certainly don ’ t claim to have all the answers when it comes to delineating the appropriate roles and responsibilities between management and examiners in a healthy bank, but i hope my remarks today will at least start a conversation about how best to structure a regulatory and supervisory framework for the banking system that effectively supports the real economy and encourages sound and sustained lending to creditworthy borrowers. we know that those community banks that weathered the storm during the crisis are already doing this in their own communities and we can learn from their experience. in order to sustain the economic recovery, we need strong, well - run community banks that operate in a framework of smart and effective supervision. i commend you for the work that you are doing every day in your communities, and i look forward to continuing the dialogue on our respective priorities and concerns. bis central bankers ’ speeches

##ring sector boundaries and product lines. for example, we have banks that want to offer bancassurance while insurance companies are underwriting financial risks that were once a domain of investment banks. as a result, it is becoming increasingly difficult for one regulator to set up a regulatory regime without taking into consideration the impact it bears on the other financial sub - sectors. in the same vein, we are increasingly seeing banks acquiring brokerage firms in the capital market. harmonisation of regulatory regimes in the entire financial sector is therefore critical in order to offer consistency and maintain financial stability. the ongoing global financial crisis has only served to underscore the inter - linkages of financial systems. the crisis has demonstrated that risks and shocks that originate from one area can be transmitted internally within a group or externally through converging products, markets or cross borders. in this regard, financial sector regulators should base their supervision on a consolidated basis by reviewing risks across the entire financial spectrum rather than purely on an industry solo basis. ladies and gentlemen, before i conclude my remarks, allow me, on behalf of my fellow regulators, and on my own behalf, to express our sincere gratitude to all the guests who responded to our invitation and set aside time to grace this ceremony. i am sure also, the totality of the financial market will appreciate this move by the regulators. finally, ladies and gentlemen, being aware of the task ahead of us, let me take this opportunity to invite our chief guest to address this gathering. welcome deputy prime minister, hon. uhuru kenyatta.