basel framework ; and · information on exposure concentration, exposures to connected parties, asset quality and profitability. the key information summary must be displayed prominently in, and be available on demand from, every bank branch. the general disclosure statement contains wider - ranging and much more detailed information on the bank and its banking group, including : · comprehensive financial statements ; · credit rating information ; · detailed information on capital adequacy, asset quality and various risk exposures ; and · information on the bank's exposure to market risk. one of the most important features of this disclosure framework is the role it accords bank directors. each director is required to sign and make certain attestations in the disclosure statements, including : · whether the bank is complying with the prudential requirements imposed on it by the reserve bank ; · whether the bank has systems in place to adequately monitor and control its banking risks and whether those systems are being properly applied ; · whether the bank's exposure to connected parties is contrary to the interests of the bank ; and · whether the disclosure statement contains all the required disclosures and is not false or misleading. directors face potentially severe criminal penalties and civil liability where a disclosure statement is held to be false or misleading. complementing the disclosure requirements, banks incorporated in new zealand are required to have a minimum of two independent directors ( who must also be independent of any parent company ) and a non - executive chairman. these requirements are intended to increase the board's capacity to scrutinise the performance of the management team. in addition, independent directors provide some assurance that the bank's dealings with its parent or other related parties are not in conflict with the interests of the bank in new zealand. the disclosure requirements have increased the accountability of bank directors and, indirectly, the accountability of various levels of management within the banks. as a result of the disclosure arrangements, we have seen directors taking greater care than might otherwise have been the case to ensure that they are adequately discharging their obligations. in so doing, directors have strong incentives to ensure that there are appropriate accountability mechanisms within the management hierarchy.

agency is not a substitute for sound corporate governance practices. ultimately, banking system risks are most likely to be reduced to acceptable levels by fostering sound risk management practices within individual banks. instilling sound corporate governance practices within banks is a crucial element of achieving this. as the commonwealth secretariat's report notes, there are a number of ways in which corporate governance in the financial sector can be strengthened. these include : · having a well designed and enforced company law ; · having codes of principles developed by professional or industry associations, setting out desired attributes of corporate governance, and associated educational and consciousness - raising initiatives ; · maintaining high quality disclosure requirements for banks and other companies, based on robust accounting and auditing standards ; · adopting measures to strengthen market disciplines in the banking sector, including by promoting a contestable and competitive banking system and seeking to ensure that bank creditors are not fully insulated from loss in a bank failure ; · effective banking supervision arrangements, with particular emphasis on policies that encourage sound governance and risk management practices ; and · leadership by example, including the adoption of sound governance, accountability and transparency practices by central banks and regulatory agencies. new zealand's approach to financial stability against this background, let me briefly summarise the new zealand approach to promoting financial stability. this has three main strands : · promoting self discipline by banks in the management of their risks ; · fostering effective market discipline on the banking system ; and · supervising banks for the purpose of promoting financial stability, but seeking to avoid supervisory practices that might erode market discipline and weaken the incentives for bank directors to take ultimate responsibility for the management of risks. let me elaborate on each of these in turn. banks'self discipline in managing risks banking supervision in new zealand places considerable emphasis on encouraging banks'self discipline in managing risks, primarily by reinforcing the role of bank directors in taking ultimate responsibility for the stewardship of their banks. since the mid 1990s, when a new public disclosure framework was introduced for banks, a key mechanism for encouraging banks to manage risks prudently has been the need for banks to issue public disclosure statements each quarter. the disclosure statements are in two forms : a brief key information summary, which is aimed at the ordinary depositor ; and a more comprehensive general disclosure statement, which is aimed principally at the professional analyst. the key information summary contains a short summary of information on the bank, including : · the bank's credit rating ; · the bank's capital ratio, measured using the