become increasingly present in the banking sector in recent decades. this does not mean that we can rest ; banks are not immune from any of the factors that i have just described. indeed, if we were to look closely at bank failures large and small over the years, i believe we would find that poor corporate governance lay at the heart of many of these failures. why should we have higher expectations for the governance of banks than we have for other firms? fundamentally, because banks must act in a way that promotes “ confidence ” to the public and the markets in general and, more specifically, to their primary stakeholders. banks play a crucial role in the flow of capital within an economy and are charged with a special public trust to safeguard customers ’ wealth. a stable and healthy banking system is critical to the long - term growth of an economy. banking supervisors have long recognised the importance of good governance ; supervision can not function properly if sound corporate governance is not in place. experience underscores the need to have appropriate levels of accountability as well as sufficient checks and balances. for banking supervisors, although the range of topics that corporate governance may encompass is quite wide, the focus is mainly on those elements that relate to the manner in which the business and affairs of an organization are governed by its board and managers. this means the decision - making process within the bank, the respective responsibilities and accountabilities of the board and managers, the control functions that provide assurance to the monitoring processes and the structures that support all these functions. good corporate governance and supervisory actions complement one another. the guidance, inspections and oversight activities of supervisors cannot guarantee, on their own, the prudent operation and financial soundness of a supervised bank. banking supervisors must rely on the competence, skills and prudence of the board and management. confidence in the corporate governance processes at the bank will enhance the supervisor ’ s overall confidence that the bank is being operated prudently. this may be reflected in the intensity of supervision applied. in addition, supervisors may expect a bank ’ s governance structure to be proportionate to its size and complexity regardless of the relevant general legal requirements. from the perspective of a prudential supervisor, the basic elements of a good corporate governance framework could include the following : - the primary responsibility for the conduct of the bank ’ s business lies with its board and management. indeed, it is difficult to conceive that a bank could carry out activities in the absence of strategic objectives or guiding corporate values.

felt that it would be appropriate to consider their revised principles as well from our prudential perspective. second, in light of the recent high - profile corporate governance breakdowns that i highlighted at the beginning of my remarks, we felt that it was important to consider whether there were any lessons to be learned that would apply specifically to our guidance for banks. finally, the committee has asked the working group to consider whether it would be appropriate to develop guidance on what i call “ know your structure ” elements. while it is too soon to report on the working group ’ s findings, they are expected to make recommendations to the basel committee this summer. we hope to issue a draft of revised guidance on corporate governance for public consultation in late summer or early fall. the ifsb has already expressed an interest in this work, and i certainly encourage everyone here to review the draft guidance when it is released and to send us your comments. we would like the guidance to be relevant not only to basel committee member countries, but to non - member countries as well. we would therefore value your feedback. as we take our work forward in the basel committee, and as the ifsb conducts its own work in preparing its exposure draft, i believe we would all benefit from keeping a sense of proportion. clearly, we cannot have the same expectations for the governance of a large, complex bank that we have for a much smaller bank. when the basel committee issues supervisory guidance, we typically say that supervisors ’ expectations should be commensurate with the size, complexity and risk profile of the institution. that applies equally here. my hope is that we can raise the bar for the governance of the banking industry as a whole, while concentrating our supervisory resources on the governance of the most complex and sophisticated institutions. conclusion i realise that i am all that stands between you and a marvellous gala dinner, so i will keep my closing remarks very brief. i would just like to emphasise that sound corporate governance should be considered a key element of a bank ’ s ability to understand and manage its risks. as supervisors, we should direct our resources to helping banks improve their controls, culture and clarity in respect to risk management. in so doing, i believe that we will help achieve our objective of a stable and healthy banking system that contributes to the proper functioning of the economy. thank you very much.