amazing progress for the compliance profession. in short, we are on our way to another level. important steps toward the next level most of my remarks today will be devoted to the things that i believe will get us to the next level. let me turn to them now. 1. ethics and compliance / values and rules the nomenclature that is used in compliance to describe the company officer responsible for compliance has changed, and the change in nomenclature is a clue to revealing a material, substantive change. twenty years ago, we called this officer the “ compliance officer ”, and i emphasize the singular. over several years the title morphed, as compliance programs in re caremark international inc. derivative litigation, 698 a. 2d 959 ( del. ch. 1996 ). bis central bankers ’ speeches developed and compliance jobs multiplied, both with respect to subject matter expertise and the types of skill sets needed to make compliance programs “ take ”. consequently, companies found that the compliance officer turned into the chief compliance officer, because in major companies, it took a village to get compliance done. compliance, you see, turned from singular to plural. more recently the title has again changed. in many companies today, the title is chief ethics and compliance officer, or ceco, reflecting a salutary trend on the part of many companies to integrate ethics and compliance. why is this happening? in my view, it is happening in recognition of the fact that it is easier to have an effective compliance program in a company that nurtures a strong ethical culture. in a recent speech, daniel tarullo, a governor of the board of governors of the federal reserve system, accurately observed that “ culture ” is a “ somewhat contested academic concept ”. yet, the evidence is growing that an ethical culture produces tangible benefits, including making compliance more effective. recent studies attempting to assess the effectiveness of compliance programs have developed a measure called the “ pei ”, or program effectiveness index. early work with the pei shows that companies combining their ethics and compliance programs tend to have better pei scores. the reason for the higher effectiveness measure seems to be something that i find perfectly rational. ethics programs, consisting of measures taken to inculcate organizational values, help to create a culture that is not only conducive to following rules that are embedded in law and regulation, but also conducive to compliance with company mores. a strong ethical culture breeds a more compliant culture. the symbiotic relationship between ethics and

and risks. it is not enough to look at individual business lines or products, but we should continue to focus on enterprise risk management that reflects each business and the interdependencies among them. moreover, supervisors should be dynamic and continue to evolve as the supervised firms do. finally, supervisors should continue to develop an industrywide, macroprudential perspective to understand the impact of the continuing evolution of the u. s. financial industry. to do this, supervisors need to continue to leverage our cross - firm, horizontal perspective to better understand how the industry is evolving and what it might mean for our objectives around safety and soundness of individual firms and the efficient provision of financial services for the economy as whole. 1 i would like to thank nicola cetorelli, bev hirtle, michael holscher, anna kovner, paul licari, jackie mccormack, siobhan sanders, joao santos, katherine tilghmanhill, and james vickery for helpful discussions and analytical work. 2 see getting it right : factors for tailoring supervision and regulation of large financial institutions, randal k. quarles, july 18, 2018. 3 see lessons from the financial crisis, william c. dudley, november 6, 2017, for reviews from a regulatory perspective ; early observations on improving the effectiveness of post - crisis regulation, randal k. quarles, january 19, 2018. federal reserve board, consolidated supervision framework for large financial institutions, december 17, 2012. 5 the latest ccar results can be found at www. federalreserve. gov / supervisionreg / ccar. htm. see dong choi, michael r. holcomb, and donald p. morgan, bank leverage limits and regulatory arbitrage : new evidence on a recurring question, federal reserve bank of new york staff report # 856 for evidence of risks - shifting in response to the imposition of the supplementary leverage ratio in the u. s. 7 see andrew g. haldane, “ multi - polar regulation, ” international journal of central banking, june 2015, 11 ( 3 ), 385 – 401 ; “ strengthening and streamlining bank capital regulation, ” robin greenwood, sam hanson, jeremy stein, and adi sunderam, brookings papers on economic activity, 479 – 565, fall 2017 ; “ bank capital allocation under multiple constraints, ” tirupam goel, ulf lewrick, and nikola tarashev