of insurers in singapore has been set up. mas is now developing risk profiles for each singapore - based insurer. we have devised a five - step " supervisory ladder of intervention ", and will use it to classify insurers according to their risk rating. the five steps range from " normal " to " viability at risk " and terminally, " winding up or closure ". insurers assessed to be on the more critical steps will receive more stringent and intrusive supervisory actions. mas draws the analogy between the risk classification of an insurance firm and the medical assessment of a patient's health. if an insurer is classified as being on the " viability at risk " step, it will probably be admitted to mas'intensive care unit. however, mas is not regulating for a no - failure regime. we encourage industry consolidation. in today's competitive environment, size brings financial strength and facilitates diversification on both sides of the balance sheet. but it is not possible, and also not desirable, to operate on the basis that we will never, under any circumstances, allow a financial institution to fail. that way lies moral hazard. improving corporate governance and internal controls a risk - based supervisory approach relies heavily on the strength of company leadership and management. corporate governance is thus critical. mas expects the board of directors to provide clear strategic leadership and set consistent corporate values. management teams must operationalise these strategies while upholding the spirit of the corporate values. given the nature of the insurance business, corporate values need to be guided by risk management concerns. what is the company's risk appetite? what should be its risk tolerance limits? what is the level of risk management skills in the company? how profitable is the underwriting of various classes of risks? apart from answering to shareholder interests, the board of directors and management also have a fiduciary duty to their policy - holders. sound internal risk management and controls are needed to protect policy - holders'interests. currently, our regulations oblige the appointed actuary to take responsibility for monitoring the financial soundness of life insurance companies. but the board and management cannot just sit back and rely on the actuaries. board and management themselves must acquire a better awareness and understanding of actuarial assessment. we need to set clear expectations of the role that the board and management play, in ensuring the financial soundness of their companies. mas will work with industry and professional associations to set out guidelines for this important

mario draghi : modernisation of the global financial architecture – global financial stability remarks by mr mario draghi, governor of the bank of italy and chairman of the financial stability board, before the committee on economic and monetary affairs of the european parliament, brussels, 17 march 2010. * * * thank you very much for having invited me to take part in this important debate between european and national parliaments. international and regional cooperation and national political leadership are essential complements for achieving global financial reforms ; and the debate in this committee is really helpful for that purpose. it is ultimately national and regional legislatures, accountable to their voters, that must decide and implement reforms. the strains in the global financial system have eased considerably in the last twelve months : the banks are once again raising funds, asset write - downs have diminished. nevertheless, elements of fragility are still present in various parts of the financial system and risks, mainly related to the deterioration of traditional loan books, the bunching of refinancing needs in the next few years, and to new sources of risk such as sovereign risk. it is essential that we can count, in the years to come, on a fully restored ability of the banking sector to perform its essential tasks in the economy. we have come a long way towards strengthening the financial system since this crisis began. but we have hard work ahead of us to finish up. in my remarks, i will focus mainly on these forward challenges. but let me start by taking stock of where we have gotten to. three things have been important in getting us to where we are now : first, the recognition that, in a closely integrated system, we all sit in the same boat ; second, the leadership of the g20 process, in which the eu has played an important role, in agreeing objectives and timelines for substantial reform ; and third, the establishment of mechanisms, such as the fsb, to hasten and coordinate the policy development needed to meet these objectives. when i say we have gotten far, i am speaking to an unprecedented amount of international dialogue and co - operation on important financial system issues, and the resulting substantive changes that either have or are about to come into place. while many issues remain to be resolved, in europe, in the us and elsewhere, we are, collectively, fundamentally reshaping the framework for systemic financial oversight : first, top - down, system - wide oversight arrangements are being put in place at the national, regional and international level. these