Cyber-threats are a vital concern for the supervisors responsible for the safety and soundness of the financial system and for individual risk managers. In the U.S., the Department of Treasury, our intelligence agencies, financial regulators and supervisors, and risk professionals across the financial sector are working to defend against cyber-attacks and to minimize the potential disruption resulting from a successful attack. U.S. authorities are working to finalize objectives-based supervisory expectations for risk management around cyber threats. I’m encouraged that this year’s Forum includes an expert panel on “Technology Risks” that will explore the cyber-threat landscape and approaches to mitigate the associated risks. A second noteworthy omission relates to a specific component of governance. While some governance topics have been remarkably stable, in my view, risks associated with business misconduct at financial institutions have not received adequate attention in these Forums. Through initiatives like the annual conference on “Reforming Culture in the Financial Services Industry,” the New York Fed has been challenging the financial industry to consider the many factors that have contributed to recent, widespread instances of misconduct. In concert with the industry, I believe that supervisors can help the industry improve governance, culture and behavioral outcomes through supporting the development of effective internal governance regimes, prudent risk management policies, incentives, and strong compliance and control structures, all within a framework of effective oversight from the board of directors. In today’s Forum and in the future, I welcome other participants’ thoughts on approaches for developing, measuring, and maintaining a strong, ethical culture within the industry.
A number of banks see the logic in this and support our proposals. Others remain less enthusiastic. But we are consulting the industry further on this and I hope that something that is acceptable to all can be arrived at. 11. Next is the issue of the review of the Code of Banking Practice, in relation to which it is suggested in David’s letter that some people are unhappy about the stance taken by the HKMA. On this, I am afraid, I have rather less sympathy than on other issues with those who raise concerns. I do not believe that any of the changes promoted in the Working Group, such as in relation to credit cards and also to fees and charges, are unreasonable. Indeed, most banks seem to have accepted the rationale for changes such as the $ card loss limit, which brings Hong Kong into line with international practice. I believe that the banks must appreciate that issues relating to terms and conditions and other aspects of customer service are a legitimate matter of public interest and concern. In the past, it is true, the HKMA has not been as closely involved in consumer matters. This, however, is something that is changing, not because we particularly desire it but because it seems to be what the public expect. We plan, therefore, to review our involvement in this area so as to determine exactly what our role should be. 2  BIS Review 3/2001  12.