financial crisis inquiry commission, january 2011. bis central bankers ’ speeches in which they were involved. finally, one cannot ignore the issue of incentives in the financial industry, especially the system of employee compensation, which at some stage heavily rewarded sales volume and short - term profits at the expense of risk awareness and longerterm prudential analysis. there is no doubt that regulatory authorities and financial institutions alike have become more aware of the need for correcting the excesses of the past. back in 2010, the seoul summit of the g - 20 committed to “ core elements of a new financial regulatory framework ( … ) as well as measures to better regulate and effectively resolve systemically important financial institutions, complemented by more effective oversight and supervision. ” this included the endorsement of basel iii rules on banking supervision, which, among others, raised the quality and quantity of bank capital and liquidity, and constrained the build - up of leverage and maturity mismatches. separately, since the global financial crisis, several pieces of legislation have strengthened prudential regulation and supervision of the industry. in the united states, for instance, the dodd - frank wall street reform and consumer protection act gave regulatory agencies increased powers of oversight towards systemically important institutions, while incorporating stricter rules on executive compensation and corporate governance. the volcker rule, introduced as an amendment to the act, was specifically aimed at shielding bank customers from risky behaviour by banks, by seeking separation of retail banking from investment banking and proprietary trading activities. at the same time, financial institutions have themselves taken steps to avoid a repeat of past crises, including a comprehensive review of their corporate culture and practices, with greater emphasis on the need to prioritize customer service. a september 2013 survey of 382 respondents from europe, asia - pacific and north america by the economist intelligence unit showed that nearly all of the respondents felt that ethical conduct was just as important as financial success to their firm, and that 67 per cent had taken steps to make staff more aware of the importance of ethical conduct. furthermore, 63 per cent had introduced or strengthened a formal code for ethical conduct, and 43 per cent had introduced financial or career incentives for respecting that code of conduct. 2 another approach followed by financial institutions was to hire high profile corporate governance specialists that have knowledge of compliance issues in order to transform their institutions, and help them to quickly step up to the required standards of compliance and conduct. if there is one area in which banks are not cutting costs, it is in the

area of risk management and compliance. this is a positive step insofar as it brings governance closer to the coal face ; however, there are also concerns that these actions, if not undertaken properly, can weaken the enforcement institutions by creating a false sense security, and achieve little more than increasing salaries for compliance officers. limits to what regulation can achieve with the ambitious efforts on the part of regulators to up their game as well, specialist skills have also been recruited from the markets into official institutions. yet the extent to which regulators can enforce more ethical standards in the industry, and avoid a repeat of the excesses that contributed to the global financial crisis, may have its limitations. the first problem resides with the ability of regulations to envisage all possible infringements. in a world where financial innovation has been moving fast, and new and more sophisticated products continue to be developed, there is always the risk that unethical market participants remain one step ahead of regulatory authorities, in the same way as unethical athletes and sport physicians attempt to be one step ahead of anti - doping agencies. and indeed, new transgressions in the recent past have been committed after the promulgation of legislation see “ a crisis of culture : valuing ethics and knowledge in financial services ”, a report from the economist intelligence unit, 2013. bis central bankers ’ speeches aimed at curbing improper practices – providing evidence that legislation will not completely prevent the occurrence of improper or fraudulent behaviour. the second issue is one of finding the optimal degree of regulation. while the events of the past decade have clearly demonstrated the limits of “ light touch ” regulation and reliance on the market ’ s ability to self - regulate, there may equally be a risk that too much regulation will stifle financial innovation, result in elevated compliance costs that will be passed through to the end - customer, and limit the willingness of institutions to provide funding to all but the most creditworthy borrowers. furthermore, “ top - down ” regulation brought about by international bodies like, for example, the g - 20, may not be appropriately tailored to all jurisdictions in which they would apply. it would be undesirable, for instance, for regulations initiated in response to developments witnessed in the world ’ s largest economies to end up stifling financial development in an emerging country like south africa. a push for elevated regulation may also easily break the fragile consensus achieved by most countries in the aftermath of the global financial crisis : in recent weeks, for instance