of supervision ( dos ) was created bringing all ses, namely, scheduled commercial banks, nbfcs and ucbs under one umbrella. unifying the supervisory functions shall reduce the supervisory arbitrage and information asymmetries across ses and address the complexities arising from their interconnectedness. this will also help in the holistic understanding of systemic risks. steps have been taken to improve the supervisory function through better capacity building and skilling of supervisors and for this purpose a separate college of supervisors ( cos ) has been set - up which is conducting extensive training programs in different areas. supervisory specialisation is also being reinforced by way of creating specialised divisions for risk - based supervision of kyc / aml risk, data analytics, cyber security and it examinations, among others. a supervisory action framework has also been put in place which provides for graded early supervisory action depending on the frequency and severity of breaches identified. ( b ) strengthening sound governance and internal controls 1. emphasis on risk culture 9. as banks are in the business of taking risks, sound risk culture lies at the heart of every decision that they take. in alignment with global developments, reserve bank too has made risk culture and business model analysis as part of its supervisory assessment. the focus has been to ensure that entities put in place a well - defined risk appetite framework, and business decision making is broadly in alignment with their risk appetite and risk bearing capacity. 2. strengthening the assurance function 10. reserve bank attaches a lot of importance to the effective functioning of internal assurance functions in its financial entities and has issued revised guidance for concurrent, internal, as well as external audits in banks. the guidelines are expected to ensure that these audits act as an 2 / 4 bis central bankers'speeches effective early warning, give greater clarity on supervisory expectations, avoid conflict of interest, provide sufficient authority / resources / independence to these functions, among others. 3. compliance function 11. the compliance function in a bank is an integral part of corporate governance, as it can affect the bank ’ s reputation with its shareholders, customers, employees and the markets ( bis, 2005 ). the recent guidance by the reserve bank on compliance function casts responsibility of the compliance culture and management of compliance risk explicitly upon the board. the guidance advises banks on laying down a board - approved compliance policy, well - defined selection process for chief compliance officer ( cco ), a fixed tenure to ccos, and requisite authority. reserve bank would expect

spending, especially in an environment of high levels of household debt. a pick - up in income growth, by way of ongoing increases in jobs and stronger wage growth should help here. we continue to look carefully at household balance sheets. on balance, our assessment is that there has been some containment of the build - up of risk in this area. this is a positive development. lending standards are stricter than they were previously and there has been a welcome decline in the share of interest - only loans, following measures taken by apra. housing credit growth has also slowed a bit, especially to investors. in the property market, prices are no longer rising in sydney, and have fallen for higher - priced houses. the melbourne market has also cooled somewhat. increased supply of housing, changes in the nature and availability of financing, and some reduction in foreign demand have all played a role. while the reserve bank does not target housing prices or household debt, it would be a good outcome if we now experienced a run of years in which the rate of growth of housing costs and debt did not outstrip growth in our incomes in the way that they did over the past five years. in terms of cpi inflation, the picture is pretty much the same as it was when we met six months ago. inflation, in headline and underlying terms, is still running at a little under 2 per cent. this is higher than the inflation rate a year ago, but inflation does remain low. the most recent data confirmed themes that we have been seeing for some time. strong competition from new entrants and changes in retailers ’ business models are putting downward pressure on the prices of consumer durables and groceries. the prices of many of these goods are lower than they were a few years ago. this is good news for consumers, although not for some retailers. we do expect to see some lessening of this downward pressure on prices at some point, although not for a while yet. the second ongoing theme is higher prices for utilities and tobacco. both of these have added materially to the cpi over the past year, and further increases are expected. the third theme is the subdued increase in wages feeding through into subdued price increases, particularly for a range of market services. this, too, is likely to continue for a while yet. we have discussed on previous occasions the reasons for the subdued wage increases. these 2 / 4 bis central bankers'speeches include the continuing spare capacity in the economy after the unwinding of the mining