The banking industry today faces many challenges, and the need for strong internal governance and control has never been more important. Controls, rules and limits within a bank – and in particular, the interactions of those controls, rules and limits – do more than just limit risk; they also create incentives.
The following speech by Wayne Byres discusses about why incentives matter. But in diverse and complex organisations such as today’s banks, ensuring that incentives are working in the right direction is easier said than done. Effective regulation and supervision is about helping to ensure those incentives are appropriately aligned, for the benefit not just of the bank but also for society as a whole.