regulated entities should ensure that employees understand that their primary responsibility is to serve customers'financial needs. there should be clear and transparent incentive structures that reward employees for delivering quality financial advice and services rather than just making sales. staff should ensure that products are recommended based on the customer's financial situation, goals, and risk tolerance. towards this, every financial institution should have a policy for customer appropriateness and product suitability framework. by adhering to such a policy framework in letter and spirit, res can greatly reduce the mis - selling complaints which form a substantial portion of the complaints that we get to see. addressing the root cause of customer complaints in order to truly embrace customer centricity, we must delve into the root causes of customer complaints. complaints are not mere inconveniences but vital feedback. as bill gates said, " your most unhappy customers are your greatest source of learning. " 1 they point us toward areas needing improvement. by addressing these root causes, we can prevent complaints from arising in the first place. i would therefore urge you to have a proactive approach in identifying root causes. regular analysis of customer feedback, complaints, and suggestions can serve as an invaluable compass in navigating toward a service - oriented future. root cause analysis will not only allow rectification of individual grievances but also enhance systemic processes to prevent reoccurrence. i would urge the customer service committees to allocate adequate time and focus on discussing the outcome of such root cause analysis to ensure that the institutions put in place mechanisms that can prevent recurrence of such complaints. it has also come to our notice that some of the banks have adopted an innovative approach to classify certain complaints as queries which results in understating the problem. this results in a false sense of complacency, and the truth will be out in any case. we seek to disincentivise such practices and as a regulator, we will not hesitate to act in case if it turns out to be an entity wide behaviour. i, therefore, request the customer service committees to keep a close watch and guard against such practices. resolution at the point of first contact every customer grievance is also an opportunity to prove our commitment to service excellence. therefore, it is essential that customer complaints are addressed promptly and fairly through a robust and efficient complaint resolution process. regulated entities should empower their customer facing staff to resolve issues at the point of first contact. the objective

banks, including indian banks, are oriented to identify risks in a manner which is able to identify the passage and path of risks and to price such risks appropriately. a report by the senior supervisory group entitled “ lessons on risk management from the global financial crisis ” ( march 2008 ) identified several weaknesses in the effectiveness of risk identification and analysis in financial firms. a report of the institute of international finance on “ reform in the financial services industry : strengthening practices for a more stable system ” ( december 2009 ) also highlighted substantial gaps in the risk management framework of large international banks. my own view is also that the basic tenets of risk management are still to take roots in banking systems, including in the indian banking system. while, the best way to measure, manage and mitigate risks, will differ from bank to bank, there are some basic tenets which risk management systems in banks need to follow and which we in the reserve bank and the audience here representing the accounting profession can help facilitate. prudential guidelines were introduced by the reserve bank in 1992 and cover various areas including provision for credit risk, market risk and operational risk. these guidelines have been periodically strengthened in line with evolving risk perceptions. banks have also developed their risk management systems to meet the requirements of the prudential guidelines. i will discuss these issues in greater detail shortly. bis central bankers ’ speeches ( iii ) banks and shocks i mentioned at the outset of my address today that shocks refer to the unexpected losses and that typically capital buffers are maintained to make banks resilient to such unexpected losses. i will speak on two critical aspects in this regard – the role of regulators and the importance of stress testing. role of regulators regulators have played a major role in facilitating the build up of capital buffers by banks to enable them to face the headwinds arising from unexpected events. the first major joint international regulatory initiative to put in place a framework for banks to recognise risks and to provide for risks was in the form of the basel capital accord in 1988. the basel accord, as the prescriptions came to be called, asked banks to identify the credit risk in their activities and to provide capital to meet obligations and absorb unexpected losses arising from such risk. the basel i framework was later extended to cover market risks. in 2004, the first basel accord was replaced by a new accord, called basel ii, which sought to shift the focus from a single broad brush risk measure to measures which were more risk sensitive and flexible, provided more emphasis on