between 2008 and 2016 the number of euro area banks declined by around 25 per cent, with spain being one of the countries where the reduction was greatest. the number of branches is also decreasing and the use of resources is generally becoming more efficient. overall, this set of structural changes is delivering positive results. the european banking system is enhancing its resilience and all actors involved are contributing : regulators, banks, and supervisors. there is, however, no room for complacency. as i will discuss next, legacies from the crisis still linger and remaining vulnerabilities call for continued vigilance and unwavering determination on all sides. out of the woods? not yet : some crisis legacies are still with us the issue that epitomises the problems left on the table is low profitability. on the aggregate, the return on equity of euro area banks has not yet recovered since the financial and sovereign crises, and remains low by historical and international standards. there are, however, important heterogeneities : small and medium - sized banks are still suffering, while larger intermediaries are recovering. in 2017, net interest income improved for some intermediaries, while fee income, supported by the asset management business, increased more broadly. profitability is also well below estimates of the cost of equity for most banks. despite the differences across banks and jurisdictions – in spain, for example, the gap is relatively smaller than elsewhere – the problem extends across europe. the causes of the phenomenon can be traced back to both transitory factors – such as the legacy assets from the adverse cyclical developments – and structural elements, including the need to adjust the business model to technological change and to the new regulatory environment. the ongoing recovery of the global and the euro area economies contributes to addressing the transitory impediments. however, analyses and simulations from various sources seem to suggest that for a non - negligible part of the european banking sector this may not suffice to recover adequate levels of profitability. going forward, the target for banks ’ profitability may actually prove to be lower than the one deemed appropriate by some international institutions, such as the imf. indeed, once the transition to the new regulatory regime is completed, and a safer banking system has emerged from the reforms, investors might reduce the returns that they expect to receive from banks. in other words, in future months the “ reform dividend ” may translate into a lower cost of equity.

american institute of certified public accountants ( aicpa ), the us and public company accounting oversight board ( pcaob ) etc made significant efforts to enforce the sox act. among the regulations and guidelines, auditing standard no. 2 has the most significant impact on it governance. the it governance requires testing of ( i ) it general controls, ( ii ) checking it process element at the time of each period - end financial reporting ( iii ) examining the it process flow control of actual transactions and ( iv ) measuring the effectiveness of it general controls over financial reporting. thus, sox had effectively mandated it governance over financial reporting and operational control. the basel accords, basel ii and basel iii, factored operational risk controls in aligning capital adequacy requirement and hence, it governance in banks was a direct fall out of these accords. in the indian context, we have elaborate clauses relating to corporate governance under the indian companies act with the companies bill 2004, various regulatory guidelines from the regulators. recently, the reserve bank appointed the gopalakrishna committee to look into various aspects of it in the financial sector. the recommendations of the committee – the report of the working group on electronic banking – had exhaustively covered the issue of it governance in banks what do we mean by it governance? all the governance principles and practices are generally top down and the it governance is no exception to this hierarchical initiative and responsibility. it governance, as a subset of corporate governance, also requires to be driven from the board level. the core of the it governance is to create it strategy that forms part of the effective corporate strategic planning process and thus ensuring alignment of it design and its controls with the business goals. the basic objectives of the it governance can be summarized as follows : aligning it strategy with business strategy it as strategic resource to deliver value it risk management it resource and financial management it performance management bis central bankers ’ speeches it policies and procedures before we begin to discuss some specific issues of the it governance, let me caution that sometimes it governance is confused with it controls and operations. it needs to be appreciated that while it governance is a strategy initiative, it implementation, operations and control mechanisms are the means to ends. alignment of it strategy with business strategy it is imperative that the business strategy and it strategy should go hand in hand, else the means would not lead to logical and planned ends. it is the business strategy which should necessitate and seek appropriate it requirements and therefore, should clearly define how the it