bank counterparties, and hence collateral for central banks ; 2. the prudent management of central bank balance sheets ; and 3. risk management and the co - ordination of supervisory and monetary policy mandates. impact of regulatory developments on central bank counterparties the central bank sits at the heart of the financial system by providing liquidity to ( and absorbing 1 / 4 bis central bankers'speeches liquidity from ) eligible counterparties. like market participants, central bank ’ s risk management practices must evolve if they are to continue to contribute to providing an effective policy response. this includes evolving in response to how changes in financial regulations affect counterparties. 2 by design, the intention of such regulations is to alter the incentives and behaviours of credit institutions and market participants. for central banks, however, our role is to ensure that the consequences of these changes do not unduly interfere with the eurosystem ’ s implementation of monetary policy, and our price stability objective. to achieve this objective it is important that we respond appropriately to changing counterparty behaviour, changing collateral composition and availability, and ensure the central bank balance sheet is sufficiently protected. while difficult to predict with certainty, some characteristics of the basel iii liquidity coverage ratio ( lcr ) or the introduction of collateral requirements under the european market infrastructure regulation ( emir ), for example, may have consequences for monetary policy operations and therefore, for central bank risk control frameworks. 3 for example, because central bank funding is treated as high quality liquid assets ( hqla ) with a 100 per cent roll over rate, under the new regulatory framework, banks may be incentivised to pledge non - hqla collateral ( such as credit claims or some asset backed securities ) for funding, while keeping their hqla unencumbered and available for other purposes. 4 it should be noted that our counterparties, for the most part, hold excess liquidity and can access as much funding as required from the eurosystem, subject to holding sufficient eligible collateral. therefore, the intended, or unintended impact of financial regulation on central bank operational frameworks may only become fully apparent once there is a change in the monetary policy stance. the real incentives created by regulatory developments will then no longer be hidden by the excess liquidity. protection is key and it must be emphasised that accepting a different set of collateral does not necessarily imply that a central bank accepts more risk. nonetheless, central banks need to be conscious of and need to plan for what these types

important for a firm ’ s resilience. as you all know, the culture of a firm is pervasive, and relevant to all aspects of how the firm is run, how decisions are made, how risks are considered, how customers are treated, and so on. it is therefore of interest to both prudential and conduct supervisors. and, as is well documented, a cause of legitimate concern both domestically and internationally. diversity can also be seen in the same light. rightly, a lot of focus has been on the need for cultural change in banks 5. however, this need for change goes beyond the banking system. certainly, our focus on culture and the lack of diversity at senior levels in the financial system extends beyond banks. it will include work in the insurance sector in 2019. it is noteworthy that a recent central bank ’ s enforcement investigation6 found that certain 2 / 5 bis central bankers'speeches individuals were : manipulating claim reserve estimates by recording claim reserve estimates that were significantly lower than that recommended by the claim handlers ; and / or significantly delaying the recording of the claim reserve estimate increases recommended by the claims handlers in relation to certain large loss claims. in order to manage the large loss claims subject to the under - reserving process, a list, was maintained. the list detailed, amongst other things, the existing claim reserve estimate recorded on the firm ’ s claims database, as well as the claims handlers ’ recommended claim reserve estimate. frequent, undocumented meetings were held between those individuals involved in the under - reserving process to discuss the large loss claims. there were multiple associated governance and control failings in the firm, as well as issues around the presence and effectiveness of challenge and so on, all of which speaks to the prevailing culture within the firm at that time. i recognise the work that the firm has done subsequently to address those failings. these issues are relevant to all firms, and it is important that the lessons are learned by all. if we look internationally, the hayne report, published in australia by the royal commission into misconduct in the banking, superannuation and financial services industry7, identified issues across banking, financial advice, pensions and insurance. the report outlines the damage done to individuals and to the overall health and reputation of the financial services industry. the report found that apologies and promises to do better, have not prevented recurrence. the report advises that because it is the entities, their boards and senior executives who bear