the measure of all worth ” in fault lines : how hidden fractures still threaten the world economy, 2010. bis central bankers ’ speeches • in a global survey of financial sector executives by the economist intelligence unit, more than half the respondents felt that their career progression would be difficult without being “ flexible on ethical standards ”. • if you look at the email and chat room messages between traders involved in the rigging of financial benchmarks, they betray a lack of any sense of guilt or wrongdoing. • in fact, traders were congratulating and complimenting each other on their manipulation. • and when subsequently questioned by their superiors or regulators, they offered an array of self - justifications, chief of which is “ everybody does it ”. but everybody does not do it. i believe the vast majority of people working in the financial industry are committed to serving their clients or customers fairly and with integrity. but the unethical actions of a few have undermined trust and created instability. reform of the financial industry will not be complete until this issue of trust and ethics is addressed. this requires “ getting the culture right ”. and by culture, i mean the shared values, attitudes and norms that guide actions. there is increasing international regulatory guidance to improve risk governance and align compensation schemes with long - term sustainability and customer interests. this is necessary but not sufficient. there are limits to what externally imposed rules can do to promote the right values in financial firms. • because culture develops from within a firm, it invites a certain resonance from the members of that firm – in a way that will be difficult for an externally imposed set of rules to achieve. • for the same reason, the behavioural norms that a firm ’ s culture and value system promotes are more amenable to internal governance and self - policing than rules that rely on external enforcement. in short, rules tell us what we can do, but values tell us what we should do. a mechanistic compliance with rules cannot be an adequate substitute for an internalised sense of responsibility and basic morality that a finance professional owes to his client or counterparty. how can we build a culture of trust and strong values in the financial industry? we need an ecosystem to do so – with a role for regulators, the industry, and most important, the firm itself. what can regulators do? first, the role of regulators. the international regulatory community has been intensifying efforts to ensure that financial institutions foster a sound risk culture and conduct themselves

and in the long term attract participants with strong internal controls. call for responsive regulation my third point concerns the role of regulators and regulations. markets are calling and indeed demanding for regulation to be more responsive to the needs of innovation and growth. if globalisation has changed the international outlook of markets, the blurring of sectoral boundaries has transformed financial markets from within. with the mergers and acquisitions of the 1990s in the financial industry, cross - selling has become prominent today with banks seeking to distribute investment and insurance products while stockbrokers offer cash management and checking accounts. insurance corporations on their part have concentrated efforts to promote investment - linked policies. the trend is in part demand - driven with customers seeking a one - stop financial house that provides convenient and integrated approach to money management. notwithstanding the global economic downturn which has checked m & a activities, market players have not let up efforts to gain a competitive edge by consolidating their positions through alliances. the regulatory response to this has been a trend towards more integrated supervision. this allows regulators to supervise the range of activities more efficiently by taking a holistic view of the financial services market. the uk fsa is one example of integrated supervision under one roof while australia ’ s securities and investments commission and the australian prudential regulation authority have ambits that cut across different industries. as product lines converge, regulators in setting the rules have to be careful not to inadvertently pick and choose the winning models. put another way, similar activities that involve identical risk issues should be regulated on an equal basis to avoid tilting the playing field. failure to do so will result in regulatory arbitrage and cause activities to migrate towards looser controls. in singapore, the regulators for banking, securities and insurance activities are consolidated in mas. specific to the capital market, we have integrated our legislation for the securities and futures industries, and harmonised our regulation of the financial advisory business to support the cross - selling of products. what is critical however, is not how regulatory responsibility is divided or consolidated into one or more agencies. the overriding objective is equitable treatment and consistency in the approach to the measurement and management of risk. capital requirements illustrate this most clearly. most regulatory models have moved away from setting fixed minimum capital for regulated activities. in banks as for capital market intermediaries, regulators are adopting and refining the risk based regulatory approach. where risks take on a similar profile therefore, the capital charges should be aligned based on a consistent principle. this is so even as