I do believe that the roadmap that we paved will lift financial skills of the citizens and the level of their inclusion, making them cognizant of all the possibilities, but of the potential threats as well. The importance of financial literacy does have enduring origins, yet it gained prominence after the global financial crisis. Unfortunately, it was a bitter way of learning how low level of financial literacy and risk awareness can contribute to a large-scale financial crisis. Of course, there is no single cause or a single player in conceiving a crisis. So was the case with this one as well. But in this crisis episode, the illiteracy played an important role. In the United States, “the development of a speculative bubble and its burst was also due to the reckless financial behaviours of households, including the most vulnerable ones who contracted mortgages they should not have subscribed considering their financial situation. Actually, individuals were often not aware of the risks they were exposed to”. It collapsed the U.S. financial system, and given the tight financial linkages, it led to a worldwide financial and economic crisis. Another example was the widespread practice in CESSE of borrowing in foreign currency, while repaying in domestic, with adverse implications for households when currencies appreciated. In some countries, individuals undertook investment risk as well, by investing in high-risk, structured products, that they did not understand. Financial illiteracy was even a trigger for irrational exuberance, with deposit withdrawal occurring on the backdrop of ungrounded causes in some countries.
It is one thing for the enhanced architecture of the global financial house to be sound. It is equally important for its participants to be able to understand and adapt to the new requirements. To illustrate, one particular rule requires market participants to obtain LEIs, or Legal Entity Identifiers for purposes of trade reporting. This will improve the usability of trade reporting data and facilitate better data harmonisation across multiple reporting regimes. In fact, when MiFID II commences in January next year, LEIs will be needed for trades with European counterparties. REFORMS AND CULTURE 16. Last but not least, no amount of regulatory reforms, rules and regulations can assure a sound and stable financial system if the conduct and behaviours of firms and individuals are flawed. A culture of strong Integrity and high ethics are crucial lynchpins to the safety and soundness of our financial system. The key to achieve this must lie in the various lines of defence in all financial institutions – where business units follow rules and regulations diligently; and Boards and Management place importance as well as give recognition to the roles of Compliance and Audit, supported by appropriate systems of reward and recognition. It must be made clear that doing right and doing good are aligned with doing well. 17. On this note, let me conclude. I am sure that this forum will provide many useful insights and much food for thought. Thank you for your attention. 3/3  BIS central bankers' speeches