•  And of course, the various financial services supervisors have pursued a number of cases in the public arena. I will say a bit more about the approach of the banking supervisory agencies in a minute. What does this mean for the individual firm? But first, what do these developments mean for the individual firm? The single strongest message I would leave is that compliance risk management needs to be heavily reflected in each firm’s governance structure and approach. Let me mention a few elements of a strong firm-wide compliance program, most of which are longstanding supervisory expectations. •  To begin with, active board and senior management oversight is, of course, critical. It is extremely important to have the right tone at the top, communicating that compliance is a firm-wide priority and that business lines, along with compliance professionals, are responsible for ensuring compliance. Incentive structures should be in place to encourage appropriate performance. •  Second, the firm should establish and maintain sound compliance risk policies, procedures, and internal controls - based on risk assessments of its businesses, and incorporating limits as needed. These components have often been embedded within dynamic and proactive enterprise-wide risk management processes that look at compliance in broader terms than adherence simply to various specific laws and regulations. A strong compliance and reputational risk management program includes that employees meet corporate standards for doing business. It should also include a mechanism to ensure critical review of high risk transactions.
In these cases, the Federal Reserve will disseminate information by issuing written guidance, or by communicating its high-level findings from horizontal reviews of bank operations which may help the industry adjust its practices. I will leave you with two brief final points. •  First, we all need to assume that managing legal and reputational risk will remain a challenge going forward. It is highly unlikely that the rapid pace of innovation and crossborder expansion will slow down, and further legal and regulatory changes are always to be expected. •  But second, and to end on a positive note, I do think that the interests of the private sector in maintaining the long-term integrity of franchises - and the official sector - in ensuring integrity of market practices - significantly coincide. This should encourage continued collaboration and dialogue and a more transparent and effective approach to the setting of expectations and developing of standards. Thank you very much. BIS Review 76/2006  5