- to - date succession plans are in place for both the board and senior management. inappropriate membership and attendance at audit committee meetings by the chairman or ceo, which can compromise the committee ’ s independence or effectiveness. inadequate oversight or on - going suitability assessments of senior management and other individuals who may have a material impact on the risk profile of the credit institution. given this list of deficiencies, it is vitally important that everyone in this audience clearly understands your personal responsibility as bank directors in ensuring your firms are effectively managed, with board members asking the right questions of senior management and ensuring that decisions are made based on sound information and judgement. shining the supervisory spotlight on appropriate governance and controls for banks is one dimension of the central bank ’ s role7. in addition, to ensure that the financial system operates in the best interests of consumers and the wider economy, we are increasingly focused on the role of organisational culture in banking. this summer we published our report on culture and behaviour8. the report highlights that inappropriate cultures were a significant factor not only in contributing to the financial crisis but also in the tracker scandal. the report also underlines that the development of consumerorientated cultures is far from complete, even if progress has been made ( albeit unevenly across banks ) to prioritise the consumer interest in strategy, decision - making and procedures. the report makes clear that there is a significant onus on the boards and senior management of 4 / 6 bis central bankers'speeches each bank to lead by example and ensure that an effective culture permeates the firm, with this commitment regularly reinforced with all staff. directors can promote a healthy and ethical culture within a bank by : promoting a client - centric focus where staff are committed to behaving correctly even when no one is watching. requiring that exhibiting the expected behaviours is central in setting objectives and designing incentives for staff. regular reviews to ensure that the culture in practice aligns with board expectations. ensuring that all three lines of defence drive culture so that it is embedded in the firm ’ s risk management framework. from our perspective, we have made clear that we are committed to increasing our supervisory intensity in the area of conduct risk, so that directors truly understand the importance of embedding a consumer - focused culture throughout their firms and that they can demonstrate how this translates to fair outcomes for consumers. boards can expect rigorous challenge from us on these issues. finally, the central bank has communicated about how low levels of diversity in key decision

of ‘ curing the disease and killing the patient ’? and how can we smooth the adjustment without sowing the seeds of the next crisis? in other words, how can policy avoid tail risks? and at what cost? also, policies designed to avoid tail risks often carry significant risks for central banks ’ balance sheets. this is something that has been studied by professor ricardo reis, who is with us today. such policies, and their reversal in the future, may jeopardise central banks ’ independence and their ability to deliver on their objectives over the medium run. this means we need to understand that central banks need to act when facing difficulty, but at the same time acting could be a big threat to the bank itself. so, when deciding on their policies, central banks need to consider not only the overall economic impact of those policies, but also the possible implications for their own sustainability. these and other difficult questions and trade - offs have been very much present in central banks ’ deliberations over the past ten years ; and they will not go away in the future because they will be present in managing the balance sheet. the second topic that we need to understand is that central banks are corporations and service providers. and related to that are the risks associated with formulating monetary policy and ensuring financial stability, as these activities will impact on their capacity to manage the balance sheet. central banks also face a variety of other risks emerging from their operational activity, extending but not limited to those affecting : asset management ; cash issuance ; payment systems ; information and communication systems, including cyber risks. materialisation of any of these risks may have a severe impact on the central bank ’ s financial 2 / 4 bis central bankers'speeches position and reputation. their prevention needs to be part of the central bank ’ s daily activities. on top of that, as banks with a balance sheet, with responsibility for the assets on the balance sheet and with the needs of a central bank, and also as entities that have supervisory powers, central banks need to set an example for the banking community and the financial system. this means that we need to be the first to introduce new approaches, we need to be the first to think about risks and we need to be the first to spread best practice among the financial community. in a nutshell i believe that to be effective, central banks need to be trusted ; and in order to be trusted, they need : to have the ability to explain their policies and deliver on their